15 Jun 2010

BNZ to raise $425m from covered bonds issue

9:17 am on 15 June 2010

The BNZ will raise $425 million by issuing covered bonds to help meet new rules that require retail banks to draw on more long-term funding sources.

The first covered bond issued by an Australasian bank, it comprises $175 million worth of five-year bonds and $250 million worth of seven-year bonds.

BNZ says the issue will strengthen its financial position.

Covered bonds raise money against a pool of mortgages that are ring-fenced from other assets on the bank's balance sheet. Though banned in Australia, they're widely used in Europe.