Mercury NZ Ltd opened its $300 million 30-year subordinated capital bonds offer to New Zealand retail & institutional investors today. There’s no public pool.
The offer will close on Thursday 4 July, and Mercury expects the bonds will be issued on Thursday 11 July.
They’ll be quoted on the NZX debt market and be assigned an issue credit rating of BB+ by S&P Global Ratings.
Mercury’s current standalone credit profile is ‘bbb’, reflecting the Government’s legislated majority ownership, although the Government doesn’t guarantee the bonds and is under no obligation to provide financial support to Mercury.
S&P said the expected issue credit rating is 2 notches below that standalone credit profile – one deducted because the bonds will be subordinated, the second notch because of the potential for interest payments to be deferred.
The offer opened with an indicative margin range of 2.1-2.25% to the first reset date, 11 July 2024, subject to a minimum interest rate of 3.6%/year for that period.
The actual margin & interest rate will be confirmed following the bookbuild process, expected to be completed next Wednesday.
Mercury intends to redeem its existing MCY010 bonds shortly after the rate is set. The MCY010 bonds have a 6.9% interest rate.
S&P considers the new bonds have an intermediate 50% equity content on issue, falling to zero in 10 years. Mercury said hybrid securities such as the capital bonds that are ascribed equity content are an effective capital management tool and it intends to maintain such instruments as a key feature of its capital structure.
Attribution: Company release.