The Dunedin City Council group is set to save $1.9 million a year in interest after Dunedin City Treasury Ltd successfully negotiating two new bonds worth $95 million.
Dunedin City Treasury Ltd is owned by Dunedin City Holdings Ltd (DCHL) and manages debt for the council and its companies.
Manager Richard Davey said the bonds replaced a floating rate note of $90 million that matured on April 15.
The additional $5 million would be used to repay short-term promissory notes that will fall due early next month. One of the new bonds was for $65 million for a term of 10 years, with the other for $30 million for five years.
The changes would reduce the cost of funds for the council group from 6.23% to about 5.90% per annum, saving it an estimated $1.9 million in interest a year.
The bond issues did not increase debt for the DCC group. There was strong interest in the bonds, which were arranged by ANZ and Westpac.
‘‘We received bids 1.6 times greater than the volume of bonds that were issued.
‘‘This illustrates the investment community's confidence in Dunedin City Treasury and the DCC group, especially given our AA rating from Standard & Poor's.''
The bond issues also helped the DCC group as they lengthened the average term of debt from 2.4 years to 3.7 years.
‘‘This reduces future refinancing risk and better matches the term of Dunedin City Treasury's debt with the intergenerational assets of the group.''
Council chief executive Sue Bidrose said the default position was for the savings to go towards paying off debt, but councillors could vote to spend the savings, such as allocating them to infrastructure renewals.
