IAG has issued unsecured subordinated convertible notes of up to $NZ250 million ($232 million) in New Zealand as part of its capital management strategy.

The offer will open on May 19 and the notes will have a final maturity of June 15 2043.

The indicative margin rate for the notes is 2.6-2.9% per annum and each note will have a face value and issue price of $NZ1 (93 cents).

IAG will announce the margin and initial interest rate on or before the opening date.

“The offer… forms part of IAG’s capital management strategy,” the insurer says. “The proceeds… will be used for IAG’s general corporate purposes.”

ANZ and Forsyth Barr are joint lead managers for the program.

IAG’s financial report for the half-year to December 31 indicated plans to “refinance a significant portion” of debt and hybrid capital via the issue of new securities this year.

The insurer wants a capital mix comprising 60-70% ordinary equity and 30-40% debt and hybrids.

Standard & Poor’s (S&P) said last week it has assigned a long-term issue credit rating of BBB to the notes.

“IAG plans to use the proceeds to replace existing subordinated debt denominated in New Zealand dollars through a reinvestment offer, and for general corporate purposes,” S&P says.

The agency says the rating reflects the additional risk arising from “subordination to higher-ranking securities and creditors; deferability of interest payments; and non-viability contingent capital terms”.