Asia PacificRisk Management Limited provides tailored advice on financial risk, hedging solutions and corporate treasury management to the following organisations in New Zealand, Australia and Asia:

• Public-listed, state-owned and privately owned companies that have financial risk exposures arising from their business activities:-
  • Importers
    
  • Exporters
    
  • Borrowers
    
  • Commodity buyers/sellers
    
• Finance companies and building societies that have financial risk exposures on liquidity, funding and interest rate movements.
  
• Fixed Interest Investment funds/portfolios or organisations who themselves invest directly into approved debt securities.
  
• Government and Regional/Local Government bodies on debt raising/refinancing and interest rate risk management on debt and invested funds.
  

Asia-Pacific Risk Management Limited conducts its retained and one-off advisory assignment under formalised engagement/mandate letters with its clients that detail:-

• Scope, objectives and deliverables of the advisory project and retained relationship
• Timetable and assigned staff
  
• Advisory Fees - fixed amounts with agreed payment dates
  
• Confidentiality undertakings from both parties.
  
  

There has been virtually no new debt issuance by major New Zealand corporate borrowers to debt/capital markets onshore or offshore since the credit crunch upset the applecart nine months ago. However, in early April listed electricity and gas lines network company, Vector Limited, announced a GBP115 million (NZD287 million) note issue under their USD1.5 billion European Medium Term Note programme. This is the first issuance by a New Zealand borrower to the Sterling debt market since Telecom in 2005. The refinancing represents 10% of Vector's debt book, and provides diversification and term (11 years to 2019). However the meeting of those excellent objectives has come at a high price due to the current debt/credit market conditions. The estimated all-up pricing on the debt issue on a swapped back to floating NZD basis was 320 basis points above BKBM.

Standard and Poor's has rated the notes at BBB+, and Moody's Investor Services has rated them at Baa1 (negative). Goldman Sachs JBWere acted as financial advisor and Goldman Sachs International acted as the arranger and dealer to the EMTN Programme and the Note issue.

The pricing Vector has paid is considerably above their average issuance margins over recent years, but is in line with secondary market pricing on BBB rated paper in the local debt market.

Central North Island lines company, Powerco (now owned by Babcock & Brown Infrastructure) have credit wrapped bonds on issue maturing in 2011 and 2012. Their secondary market pricing has blown out to 250 to 300 basis points over swap as the wrap provider, credit insurer XL Capital, have had their credit rating downgraded by Fitch from “A” to “BB”. Standard and Poor's continue to rate XL Capital at “A-”. However a prudent investor or fund manager always takes the lowest rating when a security is rated by more than one agency. They also take the lower of the issuers or wrappers credit rating. Therefore, at a rating of “BB” these bonds have fallen below the minimum rating of fund manager's investment mandates. In theory, they should be immediately selling the Powerco bonds they hold.

Powerco itself is credit rated BBB by S & P. Holders of these wrapped bonds should be requesting Powerco to cancel the credit insurance policy with XL Capital. No doubt the economics do not allow this, and Powerco has no incentive to do so. Effectively, the Powerco wrapped bonds are trading on the company's own BBB rating.