New Zealand Local Government Funding Agency (LGFA) was enabled under the Local Government Borrowing Act 2011. The agency is owned by 30 local authority councils and the New Zealand government. It is a council-controlled organisation operating under the Local Government Act 2002.

LGFA’s primary purpose is to provide more efficient funding and diversified funding sources for New Zealand local authorities. LGFA has 71 council members, which cover 95% of sector debt. LGFA’s obligations are guaranteed by 59 councils. The security backing the guarantee obligations is the property taxes of the guarantor councils.

LGFA has provided investors with a new source of New Zealand dollar denominated securities rated AAA/AA+ (domestic long-term) by international credit-rating agencies S&P Global Ratings and Fitch Ratings after S&P upgraded the domestic and foreign-currency long-term ratings on 22 February. On 28 January 2020, Fitch placed the foreign-currency long-term rating of LGFA (AA) on positive outlook.

These ratings are the same as those of the New Zealand government.

LGFA had NZ$13.7 billion in bonds outstanding as at December 2020, with NZ$1.5 billion due to mature in May 2021. There are nine further maturities to 2037. The LGFA statement of intent forecasts LGFA bonds on issue, including treasury stock, to approach NZ$14.5 billion in total volume by June 2023.

LGFA bonds typically have the same maturity dates and coupons as New Zealand government bonds (NZGBs) but yield an additional 15-60 basis points over the comparable NZGB maturity as at December 2020. All LGFA bonds are listed on the NZX debt market.

LGFA also issues three- and six-month LGFA bills via monthly tenders and private placements. As at December 2020, NZ$612.5 million of LGFA bills was on issue.

LGFA is the largest issuer of New Zealand dollar debt securities after the New Zealand government, with NZ$13.7 billion of bonds outstanding. The agency commenced issuance in February 2012 and has issued bonds by tender and syndication.

There had been 77 such tenders by the end of 2020. Tenders are typically NZ$150-200 million at intervals of 4-6 weeks. LGFA usually uses syndication to launch new bond maturities.

The agency borrowed NZ$2.9 billion in FY20. Its funding requirement for FY21 is expected to be NZ$3 billion, depending on underlying councils’ borrowing needs and the optimal volume of liquid assets LGFA holds.

LGFA’s funding strategy is to create liquidity in its bond curve. It will continue to offer existing bonds until amounts outstanding in each maturity have been built up to at least NZ$1.5 billion. This places tranches of LGFA maturities among the largest New Zealand dollar debt securities.

View the schedule of tender dates in 2021 for LGFA bonds and LGFA bills on the LGFA website.

Mark Butcher
Chief Executive
+64 4 974 6744
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www.lgfa.co.nz