20 Oct 2008

Council and companiies find investors prefer banks

9:33 pm on 20 October 2008

The Government's bank guarantee scheme means higher debt costs for Dunedin City Council and two airport companies.

The council and the Auckland and Wellington International Airport companies last week raised only half the money they needed from investors, as regular buyers stayed on the sidelines.

The airport companies were seeking $56 million.

The council says it had to dip into reserves and use bank loans to repay $20 million due last Wednesday.

It says buyers of the AA-rated debt are contemplating deposits in banks guaranteed by the Government instead.

Head of finance Athol Stephens says councils raise up to $1 billion a year this way - but now face having to borrow from banks at much higher interest rates.