Contact Energy and Fonterra have between them raised $1.3 billion in oversubscribed senior bonds during the past three weeks.
Four more companies are similarly chasing a total of $680 million.
The global credit crunch, prompting spiralling international interest rates and often little or no available refinancing, has forced corporates back to the market to issue senior bonds, with much success.
With New Zealand's declining interest-driving official cash rate (OCR) and falling banks' term deposit rates, investors are lapping up the 7%-8% bonds.It is widely picked the Reserve Bank will slash the OCR a further 0.5%, or possibly 1%, to an unprecedented 2.5% on Thursday, which would further undermine bank term-deposit rates and make them even less attractive.
ABN Amro Craigs broker Peter McIntyre said investors had oversubscribed many of the investment grade senior bonds largely because of the simplicity of the offers and understanding of the companies involved.
"More corporates are going to bonds because the commercial market funds are either not available or are too expensive," Mr McIntyre said.
Fonterra will use its $800 million for retiring short-term debt, while Contact Energy's $550 million is pencilled in for its capital investment programme, or possibly to repay existing debt.
Contact Energy intended to raise $300 million by March 31, but capped the five-year 8% bonds offer at $550 million because of oversubscription.
Fonterra sought about $300 million. Its 7.75% five-year bond offer was also oversubscribed and was capped at $800 million.
"Primarily, these [bond] issues are being used by companies to replace existing debt, for use as working capital or for short-term capital expenditure needs," Mr McIntyre said.
The debt-to-equity ratio of Fonterra had risen due to the dairy giant buying out shares of drought-stricken North Island farmers, but during the next 12 to 18 months was expected to get the ratio below 50%.
Contact Energy had an unremarkable debt-to-equity ratio at present of 26%, with plans to expand that to the mid-30s, Mr McIntyre said.
He noted that while the corporates were doing well from the issues, banks were seeing a run on investors leaving term deposits whose rates are declining which is putting further pressure on bank liquidity, just as banks themselves are seeking to replenish funding lines. Insurer Tower is in the process of raising $80 million in bonds, AMP $300 million and NZ Post $150 million.
Auckland City Council has recently raised $150 million. Mr McIntyre said NZ Post would, as a state-owned enterprise, be attractive for investors, while listed Tower (which is non-rated) and AMP issues were like Fonterra and Contact, in that they were investment grade and were transparent in their financial reporting.
While none of the issues come under the Government guarantee scheme, they were being analysed on their respective balance sheets and "risk, reward" alongside international rankings, Mr McIntyre said.
