National Australia Bank Plans Buyback of Government-Backed Bonds

National Australia Bank Ltd. (NAB), the nation’s fourth-largest bank by market value, is seeking to buy back bonds it sold with government backing in 2008 and 2009 amid a global credit freeze.

The Melbourne-based bank offered to repurchase three lines of Australian dollar-denominated notes comprising a combined A$4.16 billion ($4.3 billion) of outstanding securities, according to an e-mailed statement from HSBC Holdings Plc, which is helping to manage the transactions. The lender is also seeking to buy back $2.75 billion of U.S. dollar-denominated guaranteed notes, according to a separate HSBC statement.

Australian banks including Westpac Banking Corp. and Australia & New Zealand Banking Group Ltd. have repurchased government-backed notes as credit markets recovered, giving the banks access to cheaper funding. There were A$82.9 billion of outstanding bonds as of last month that still carried the guarantee, which was announced by then-Prime Minister Kevin Rudd in October 2008, according to a federal website.

National Australia Bank is offering to buy back the Australian dollar bonds at a spread of 10 basis points, or 0.1 percentage point, below swap rates, according to the statement. The offer applies to its 5.75 percent December 2013 securities, floating-rate notes due January 2014 and 4.75 percent February 2014 debt.

The lender is seeking to repurchase the U.S. dollar fixed- rate debt at a yield of 5 basis points less than the 0.25 percent Treasury due Oct. 31, 2014, while floating-rate noteholders can sell their securities back to the bank for $1,009.82 per $1,000 face value.

The Australian government charges a fee of 70 basis points to 150 basis points a year to guarantee debt under its program, depending on the credit rating of the borrower.

To contact the reporter on this story: Sarah McDonald in Sydney at smcdonald23@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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