Westpac to pay a premium on philanthropic bond

Westpac to pay a premium on philanthropic bond

By Paul McBeth

July 14 (BusinessDesk) – Westpac Banking Corp. is wearing the cost of a premium interest rate on its five-year bond that will donate a portion of investors’ returns to rebuilding Christchurch.

Westpac Institutional Bank chief executive David McLean told BusinessDesk the 5.8% annual return, of which 0.5% will go to the Christchurch Earthquake Appeal Trust, was at a premium to similar bank bonds and is almost 1.5 percentage points above the five-year swap rate of 4.37%.

“It’s relatively expensive money for Westpac,” McLean said. “If we weren’t doing it for Christchurch, we’d probably be doing something a lot cheaper.”

The so-called ‘red & black bond’ follows in the footsteps of the government’s four-year Kiwi Bond, made available in this year’s budget, of which all the funds raised will go into the Canterbury Earthquake Recovery Fund.

Westpac’s bond has a minimum size of $50 million and a cap of $400 million, though McLean said the bank is targeting $100 million, which would see $2.5 million donated to the trust over the five-year term.

Normal withholding tax will apply on the return to investors, but not on the portion donated to the trust.

Westpac has also made an application to list the security on the NZX’s debt market.

The trust will use all the money donated to rebuild community projects such as sports and cultural facilities, and community halls.

UBS New Zealand, First NZ Capital, Forsyth Barr, Macquarie and NZX had a hand in making the bond available, and brokerage fees will also be donated. Chapman Tripp, Link Market Services and Colenso BBDO also donated their time and resource.

(BusinessDesk)

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