The offer to institutional investors and to retail investors through broking firms opened on Monday and will close at 2pm tomorrow, Wednesday, a process called a book build.
The indicative margin of 0.75% offered above the base rate (yet to be calculated) was at the lower end of expectations, Forsyth Barr head of fixed interest Max Brown said.
Moreover Fonterra was not paying any “distribution” to encourage financial advisors, who would need to charge their clients and not the company for any bond arrangements entered into.
“Back in 2009 Fonterra really needed the bond money and they paid brokerage but now they figure they don’t need to.
“Farmers will be pleased Fonterra is holding on to every last cent during this book building.
“It will be interesting to see how much is attracted, with the provision to take unlimited over-subscriptions.”
Fonterra said the base rate would be calculated as the semi-annual mid-market rate for interest rate swaps for the term between when the bonds are issued and when they mature.
That rate would be set tomorrow "by market convention" with reference to Reuters data, it said.
Brown agreed that was standard practice and his own expectation was that the coupon rate would be around 4.35%, being current swap rates plus the indicative 0.75% margin.
The bonds are expected to be quoted on the NZX Debt Market and are expected to be assigned a long term credit rating of A by Standard and Poor’s and AA- by Fitch.
