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 (CCO) 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 74 council and one CCO members, which cover 95% of sector debt. LGFA’s obligations are guaranteed by 65 councils. The security backing the guarantee obligations is guarantor councils’ property taxes.

LGFA has provided investors with a source of New Zealand-dollar denominated securities rated AAA/AA+ (domestic long-term) by credit rating agencies S&P Global Ratings and Fitch Ratings. On 28 January 2020, Fitch placed LGFA’s AA long-term foreign-currency rating on positive outlook. These ratings are the same as those of the New Zealand government.

LGFA had NZ$15.9 billion in bonds outstanding as at December 2021, with NZ$1.7 billion due to mature in April 2022. It has 12 maturities out to 2037.

LGFA bonds typically have the same maturity dates and coupons as New Zealand government bonds (NZGBs) but yield an additional 25-60 basis points over the comparable NZGB maturity as at December 2021. 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 2021, NZ$535 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$15.9 billion of bonds outstanding. The agency commenced issuance in February 2012 and has issued bonds by tender and syndication.

There had been 86 such tenders by the end of 2021. Tenders are typically NZ$150-200 million and take place at intervals of 4-6 weeks. LGFA usually uses syndication to launch new bond maturities.

The agency borrowed NZ$3.3 billion in FY21. Its funding requirement for FY22 is expected to be NZ$3.1 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, and LGFA bonds are the most heavily traded NZD bond after NZGBs. 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.

In addition to the above retail bonds listed on the NZDX, LGFA has NZ$130 million of wholesale floating-rate notes on issue.

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