In today's email, we detail how Kiwibank had a no good, bad day: look at how the clock is ticking for Teach First; and examine Waikato's Change Plan 1.
1. Kiwibank's transaction declined
Yesterday was a difficult day for Kiwibank and an embarrassing one for bankers employed by the Government.
Kiwibank had to cancel an issue of A$175 million worth of 10 year bonds that was due to settle yesterday because the Reserve Bank decided two earlier hybrid Tier 1 and 2 bonds from 2014 and 2015 didn't comply with capital adequacy rules.
It was the biggest type of 'transaction declined' message you could ever hope to see and forced Kiwibank to send two urgent announcements to investors reassuring them of support from shareholders in the event it has to raise extra capital.
It's not the sort of message banks like to send to anyone.
The incident also raises some bigger questions about the Reserve Bank's sharper and more aggressive approach to capital requirements. It has just launched a review of capital requirements that is expected to force banks to put more equity aside for riskier loans.
There is now a cloud over banks issuing 'hybrid' debt that doubles as both debt and equity for capital adequacy purposes. It also means that, if the Reserve Bank decides Kiwibank's hybrid issues do not equate to equity capital in the intended amounts, the ACC, NZ Super Fund and the Government may have to stump up more capital.
The irony is that Kiwibank's contortions to raise capital through its hybrid bond issues was all about avoiding the Government having to tip in more money -- as was last year's deal to sell 47 percent to ACC and the NZ Super Fund.
2. Teach First future in doubt
Newsroom's new National Affairs Editor in the Press Gallery Shane Cowlishaw has the scoop on how Teach First NZ is scrambling to find a new partner after Auckland University pulled out of the controversial private training programme.
Teach First puts graduate trainees into schools after eight weeks training and the core programme was developed with Auckland University. The Government has championed the operation and had to amend the law to overcome a legal block to Teach First's trainees getting jobs instead of qualified teachers.
A failure to find a partner would be a blow for the Government's education policies, and for the outgoing Hekia Parata.
Auckland's Dean of Education told Shane the decision to pull out was fiscal and the University's entire post-graduate teacher curriculum was being reviewed for efficiencies.
Associate Education Minister Nikki Kaye told us she was confident Teach would find a partner. The race is on for Teach First to find a partner well before the 2018 academic year.
We'll be watching this space.
3. Tourism funds debate turns ugly
Local Government New Zealand's revelation on Tuesday that there were 680 Council projects costing NZ$1.38 billion that were needed to cope with the tourist boom got some ministerial blow-back yesterday.
Tourism Minister Paula Bennett put out a statement thanking LGNZ for its "tourism wish list" and then picked out things such as town hall upgrades, runway extensions and expressways as being on the list.
The actual list hasn't been seen yet and is likely to come out when Tourism Industry Aotearoa puts out a report soon.
But Bennett picked out projects that LGNZ said weren't on the list, including Wellington's runway extension.
Whatever the case, she was in full "zip it sweetie" mode in the statement.
"I think most taxpayers would agree that restoring old council chambers is not a priority in terms of tourism infrastructure," she said.
The problems around tourism infrastructure are becoming acute though, with the Government's NZ$12 million fund being ridiculed as insufficient and pressure on for a visitor levy or bed tax to help councils out, particularly the more remote ones with small ratings bases. It will be a focus in the Budget.
4. Explaining Waikato's Plan Change 1
Newsroom's Environment Reporter in Auckland, Eloise Gibson, has written a comprehensive explainer of the Waikato Regional Council's Plan Change 1 for Newsroom Pro.
She finds there's plenty that is worrying the players on all sides of the debate over dairying and nitrogen leaching into the waterways.
Over 1,000 submissions were received on the controversial plan and it is set to be huge topic of debate for dairying and environmentalists. That debate is being closely watched up and down the country as the temperature around water ratchets up.
That was reinforced by Paddy Gower's piece on Newshub last night about the decommissioned Kaputoni wool scouring plant in Christchurch being sold to overseas interests. It has consents for millions of litres of water that could be bottled, with fees of less than $100.
The water quality and water bottling export story is not going away.
5. Two for one closing down special
Newsroom's Co-Editor Tim Murphy takes a look at the careers of John Key and David Cunliffe in this piece after they announced yesterday they would step down in tandem before the election to maintain the balance of parliamentary numbers and avoid two costly by-elections.
They're leaving together, but Tim picks out the key difference.
"Timing is everything and Key had it. Cunliffe didn't," he writes.
6. Special attention for special vehicles
Those following the Auckland housing supply and infrastructure funding debate will find plenty to chew on in this exchange between Labour's Housing Spokesman Phil Twyford and Finance Minister Steven Joyce in Question Time yesterday.
Twyford's proposal to use targeted rates streams to service new infrastructure bonds to help build the infrastructure for housing got an airing. The idea has the support of the Property Council, the New Zealand Initiative and Infrastructure New Zealand.
But Joyce said he thought it would still be scuppered by ratings agencies judging that the debt still belonged to council balance sheets.
He's more interested in special purpose vehicles. We'll hear more about these in the months to come.
"We are looking at something called special purpose vehicles, which might help in this regard, but you cannot just pretend the debt goes on the council," Joyce said in conclusion.
We are also likely to hear more about this in the Budget.
7. Coming up...
December quarter GDP figures out at 10.45 pm are expected to show economic growth slowed a bit to 0.7 percent in the quarter, but that annual growth is still well over three percent.
- One fun thing
This Julian Lee investigation on Stuff was the talk of Parliament yesterday. It reveals how the Westland District Council's Vivek Goel selected a Waiuku cake decorator to build a $7 million sewage plant in Franz Josef.
Goel has now been stood down and the Serious Fraud Office is investigating...
Have a great day.