Macquarie New Zealand launches investment rated generator bonds

16 July 2003

Delivering on its “Forward Thinking” brand, Macquarie Equities New Zealand today launched Generator Bonds, offering New Zealand investors the highest return currently available for any fixed interest investment with an “Investment Grade” rating.

An application has been made to Standard & Poor's (S&P), one of the world's largest credit rating agencies, for a rating of Generator Bonds. This is expected to be A-, which is considered “Investment Grade”.

Generator will pay 7.75 per cent per annum - 8.25 per cent per annum, with the rate set once the offer has closed and the bonds are issued, and remains fixed for the five year term.

Craig Swanger, Head of Macquarie Financial Services Group in NZ, said Generator Bonds were a market first, offering an attractive combination of credit rating and returns by using investment options previously only available to retail investors outside NZ.

“Generator Bonds achieve their return by using a Collateralised Debt Obligation (CDO). The returns on this type of fixed interest investment are generally higher overseas, so the main challenge has been to bring this offer to New Zealand.

“We're offering a bond for direct investment in the same way that investors have always invested in NZ government and corporate bonds. Investors receive their returns in New Zealand dollars with no exposure to foreign exchange movements,” Mr Swanger said.

“Generator Bonds are issued by Generator Bonds Limited and were created for New Zealand investors seeking regular income, and interest payments will be made quarterly,” he said.

“The S&P credit rating is one of the most important features of this product. Like all investments, including property and equities, fixed interest investments such as bonds, debentures and mortgage products carry risks. It is very important that investors look for a credit rating from an independent rating agency and seek advice from a qualified adviser to ensure they assess their risk tolerance and invest in line with that tolerance.”

Independent credit rating agencies, like S&P or Moody's, provide a globally accepted system of rating fixed interest investments.

S&P data going back 22 years shows that if an A- rated corporate bond is held for a five year period, there has historically been only a 0.85 per cent average chance of it defaulting. This compares with a 2.24 per cent average chance for BBB rated bonds, 10.86 per cent for BB rated bonds and 50.5 per cent for CCC rated bonds. This steep rise illustrates the value of S&P credit ratings as a guide to the risk that a bond will default.

The interest rate payable on Generator Bonds will be finalised on the issue date, shortly after the offer closes on August 13 th . It will be 7.75 per cent, 8.00 per cent or 8.25 per cent per annum, depending on the level of interest rates in New Zealand and overseas during the next four weeks.

This rate will be fixed for the five year term and no fees will be deducted from this return.

This offer is open for four weeks, until August 13 th The total issue size will be $100million with potential for up to $50million in oversubscriptions. More than $100million has already been secured by participating financial advisers.

For further information contact :

Craig Swanger
Head of Macquarie Equities
New Zealand
Tel: 09 357 5913
Mob: 0213 21851

A combined prospectus and investment statement has been lodged for registration with the New Zealand Companies Office. Applications to invest can only be made on the application form attached to this document.