Funding In A Difficult Market – NZX/ASX Top 50 Analysis

Chapman Tripp’s latest NZX/ASX Top 50 Funding Composition Trends & Insights publication reports that listed companies will face distinct funding challenges this year in a “Chicken Licken” market infused with a sense of impending catastrophe.

This reflects recent weather events and their likely impact on economic sectors which are already under intense pressure from rising interest rates.

The firm’s annual analysis of the New Zealand Main Board (NZX) Top 50 tracks trends in funding arrangements, with comparisons made to the Top 50 entities listed on the Australian Main Board (ASX Top 50).

Chapman Tripp partner Cathryn Barber said “Although the current environment is more volatile and challenging than usual, we expect to see a continuation of existing trends in 2023 rather than sharp changes in direction.”

The research draws from a review of funding sources as reported in the NZX Top 50 and ASX Top 50 annual reports at close of trade on 31 January 2023. Banks, overseas companies and listed funds were excluded from the data set.

The report found that ASX Top 50 companies are more diverse in their debt financing arrangements than their New Zealand counterparts, with the majority having a spectrum of debt products available to them.

“This is much less the case in New Zealand, particularly among the NZX second 25 which are still very reliant on bank debt as their primary source of funds,” Barber said.

While, most of the NZX Top 25 have raised funds in one or two currencies only (typically USD, EUR or AUD), the majority of the ASX Top 50 have much wider foreign currency sources, reflecting their size and debt requirements.

Other findings include:

• Bond issuances have increased significantly, after the COVID-related disruption of the last few years.
• Green bonds continue to gain momentum and Spark Finance Limited’s 6.5 year NZ$100m sustainability linked bond issuance marked an important milestone in the development of the New Zealand sustainable finance market.

Barber says, “We expect the adoption of sustainable finance instruments and ESG principles will continue to increase, including the integration of green financing into existing lending arrangements where applicable.”

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