NZ government lends support to Kiwibank rating

NZ government commits to propping up Kiwibank credit rating

By Paul McBeth

Aug. 18 (BusinessDesk) – The New Zealand government has committed to propping up state-owned lender Kiwibank’s AA- credit rating.

New Zealand Post group chief executive Brian Roche said the government will provide uncalled capital support on commercial terms to provide stability to the credit rating, though the terms and conditions of the facility are being finalised. Kiwibank, which is a subsidiary of NZ Post, needs the rating to continue its expansion into business lending. The uncalled capital can only be used to protect against a significant external event, and won’t be available to fund growth or support weak earnings.

“The government’s decision is a major boost in helping the bank retain a credit rating which will enable it to continue to grow and expand its range of services to the market,” Roche said in a statement. “What the uncalled capital does provide is the base for a stable credit rating from which New Zealand Post Group can launch ambitious and exciting plans for Kiwibank.”

In May, the lender’s outgoing chief executive Sam Knowles said it needed south of $100 million to enter the corporate sector and win rivals from its Australian-owned competitors. The bank raised $150 million in March through a preference share issue.

John Tulloch, a NZ Post spokesman, said the actual figure was commercially sensitive, and was essentially a signal to Standard & Poor’s that the bank has the tacit support of government.

Kiwibank will announce its full-year earnings today.

(BusinessDesk)

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