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ANZ National has become the first New Zealand bank to use the government's wholesale guarantee to raise money offshore since the scheme was introduced last November.
The bank said that it had priced $US1 billion ($NZ1.76 billion) of three-year government guaranteed debt.
The medium term notes mature in April 2012 and have a cost of about 2.5% over the New Zealand wholesale curve inclusive of the guarantee fee and other conversion costs.
ANZ National chief executive Graham Hodges said the level of support for the offer was very encouraging for the bank and significant for New Zealand as a whole.
"We didn't actually need to go to the markets particularly, but we felt it was sort of important to put the guarantee out there and road test it.
"Because it's important to understand whether it functions properly or not, and it clearly does," he said.
The bank could have raised more, with demand higher in the fixed rate area, but at the pricing involved the bank had elected not to.
There was also demand for floating rates but it was decided to keep the issue fixed rate.
"It's not cheap money but in today's marketplace, my perspective in terms of running the bank is to make sure that we're well funded and sound in the sense of having a good structure around our funding," Hodges said.
That was "really important going forward because we do not quite know how long the instability in the credit markets will last".
ANZ National had already locked away funding for 2009 through other alternatives.
"What this does mean is that we can continue to run down our short term borrowings that we have had through the normal commercial paper markets," he said.
That would give the bank the capacity to draw back into the
short term markets should the overall global position deteriorate.
Those markets had generally remained open.
Credit markets for normal unguaranteed credit at term still
remained "reasonably closed", Hodges said.
So without a guarantee, for terms of anything over two to three years it would be a struggle to do a deal except at prohibitive cost.
