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Shareholders pour $247m into Kiwibank

NZN 7/04/2017 Paul McBeth

Kiwibank shareholders New Zealand Post, the New Zealand Superannuation Fund and Accident Compensation Corp will pour in a collective $247 million to make sure the state-owned bank's capital stays within the regulator's limits.

Wellington-based Kiwibank canned a A$175 million bond issue last month after being told those instruments didn't meet the Reserve Bank's capital adequacy framework and that earlier issues of a tier 2 convertible subordinated bond and additional tier 1 perpetual bond also didn't comply.

Kiwibank on Friday said its three shareholders subscribed to $247m of common equity relative to their existing stakes as a response to the central bank's preliminary view.

"Kiwibank remains of the strong view that existing convertible capital instruments are compliant and is working with the Reserve Bank of New Zealand to resolve this matter," Kiwibank head of funding Geoff Martin said in a statement.

The Reserve Bank is reviewing the definition of bank capital, the measurement of risks that the banks face and the minimum capital requirements and buffers to set up a regime that provides confidence in the banking sector.

Kiwibank has $150m of perpetual notes paying annual interest of 7.25 per cent listed on the NZX, which recently traded at $103.25 per bundle of $100 face value.

The bank's $100m of bonds maturing in 2024 and paying annual interest of 6.61 per cent, recently traded at a yield of 5.2 per cent.

The bonds' interest rate resets in 2019, at which time Kiwibank can also repay the debt.

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