KEY POINTS:
Rabobank will raise a record-breaking $900 million with its new New Zealand bond issue as investors flock to safe havens in the wake of finance company collapses and volatile global equity markets.
The Dutch banking giant - with the AAA credit rating - had initially been seeking to
raise just $400 million.
The acceptance of an additional $500 million in oversubscriptions makes it New Zealand's largest non-government debt issue and more than twice the size of the next biggest debt issue on the local markets.
Joint lead managers First NZ Capital and ASB had to delay an announcement on Friday as they went back to the bank's board of directors to get approval for the much larger size.
It was possible that the issue could have been even bigger, said First NZ Capital director of investment banking David Smith. But it was prudent to draw a line to ensure there was some demand to get trading of the bonds off to a good start.
The securities - which are perpetual and have their rate of return adjusted each year - are expected to be highly tradeable.
The size of this issue would ensure a good level of liquidity, Smith said.
The margin on the Capital Securities has been set at 0.76 per cent above the one-year swap rate - the basic rate at which banks lend money to each other. The final interest rate for the first 12 months will be set on October 8. Based on Friday afternoon's swap rates, the interest rate would have been 9.29 per cent.
The record issue comes just days after a Yellow Pages bond issue - seeking to raise up to $150 million - was scrapped due to lack of demand.
In contrast to Rabobank, the Yellow Pages bonds would have been unrated and not considered "investment grade" by the market.
They would have offered a rate of return in excess of 11 per cent.
But market analysts flagged concerns about the level of debt Yellow Pages private equity owners had taken on to buy the company.
Since the fallout from the US sub-prime mortgage crisis, there has been a worldwide repricing of risk.
The huge uptake of the issue was proof that the market was seeing a "real flight to quality", Smith said.
About three-quarters of the bonds had been sold to the retail market with the remainder being taken by institutions, he said.
"What the retail brokers were telling us was that they were getting some very large orders from high net worth individuals.
"Secondly, they were seeing clients which they had not seen before but who had money in finance companies and were looking for alternatives."
Rabobank - a co-operative company - is the highest rated non-government-owned bank in the world.
It has assets of more than ¬556 billion ($1.1 trillion) and liabilities of ¬527 billion.
It dominates the retail banking market in the Netherlands, which provides about 55 per cent of its income.
The securities themselves will come with an investment grade AA rating from Standard & Poor's and an Aa2 rating by Moody's.
The offer is scheduled to open today and will close on Friday, October 5, unless closed earlier by the bank.
THE BIG ISSUE
* Rabobank is to issue $900 million, breaking the record for New Zealand's largest non-government debt issue.
* The Dutch bank's AAA credit rating has driven demand as investors scramble for low-risk products.
* About three-quarters of demand was from retail investors.
* The securities will have an initial rate of return 0.76 per cent above the one-year swap rate
