Although the lead manager would not disclose the pricing equivalent to swap, Joe Azzam, managing director, global fixed income, Asia Pacific at TD Securities in Sydney, says the deal priced in line with where the original deal was trading - in the high 20s under swap. The original deal, which was led by ANZ Institutional Bank, Deutsche Bank and RBC Capital Markets, priced in September 2007 at 27 basis points through swap. "Expanding our dealer group to include TD Securities - which sourced the placement of the increase to international investors - is a real positive. We have a very solid group," says Richard Jackson, general manager, financial markets, at QTC in Brisbane.

According to Jackson, the increase makes the new NZ$700 million line somewhat more liquid. "It also matches our strategy of diversifying our funding base. And the pricing was very attractive - particularly for 10-year funding," he says.  

According to the lead, the deal attracted "a handful" of real money investors - all from offshore. "We have had domestic interest in deals in recent times, but the insto accounts are looking for shorter duration at the moment," says Azzam.

The heavy international investor interest reflects the migration of instos towards the Kauri product in lieu of global kiwi product. "Traditionally, international demand has always driven the global kiwi market. The Kauri market was always expected to garner more and more interest from offshore and we are now seeing that," says Azzam. Adds QTC's Jackson: "The dynamics of the NZD-denominated bond market - in terms of currency and rates - are very attractive to offshore investors. And there is certainly not an oversupply of government bonds out there - it is difficult for them to find such high-grade credits as QTC."

The deal was originally issued off an EMTN programme - which includes 144a capability - to allow qualified US-based investors to buy the Kauri bonds.

QTC's bonds have certainly been the Kauri of choice for international investors to date, with 77 per cent of the issuer's original transaction sold to offshore buyers and all the latest bonds going offshore. QTC remains the only Australian semi-government to access the Kauri market. The market, which in year to date totals NZ$2.25 billion - exactly the same amount posted in the year to August 10 2007 - continues to be dominated by financial institution and supranational issuance, which account for 38 per cent and 34 per cent of issuance, respectively.

The deal remains QTC's only Kauri bond outstanding, but Jackson says he would be keen to access the market again this year. "At the moment the offshore interest withholding exempt market has slowed because people are waiting for the legislation to be enacted," adds Jackson. He is referring to the May 20 announcement from the Treasurer of the Commonwealth of Australia that the government will increase debt issuance, the Australian Office of Financial Management (AOFM)'s investment mandate will be expanded and that semi-government bond issuance will be exempt from interest withholding tax.