UPDATE 1-KKR-backed Pepper Money plans to raise $389 mln in Australia's biggest IPO of year

(Adds CEO comments, analyst quote, and background)

By Shruti Sonal

May 7 (Reuters) - Private-equity firm KKR-backed Pepper Money plans to raise about A$500.1 million ($389.38 million) in Australia's biggest initial public offering of the year so far, valuing the non-banking lender at A$1.3 billion.

The listing plan comes as near-zero borrowing costs and rebounding investor confidence spark hopes of record deals in merger and acquisition activity this year, leading to a jump in initial public offerings (IPOs) in Australia.

Pepper Money, which provides home loans and commercial real estate loans in Australia and New Zealand, also plans to capitalise on the rebound in jobs and the housing market.

"As consumer confidence starts to build, people are getting back into jobs, opening new businesses, and looking for finance," Pepper Money Chief Executive Officer Mario Rehayem told Reuters in an interview.

"We are trying to cater to customers whose needs are not addressed by traditional lending as they... went through a tough time during the pandemic."

Priced at A$2.89 per share, Pepper Money's offering is set to overtake the A$408.6 million one from pathology services provider Australian Clinical Labs announced in April.

'GOOD TIME TO DO AN IPO'

Australian companies have priced nearly $2.3 billion of IPOs this year, as of May 4, the most year-to-date in 14 years, according to data compiled by Bloomberg.

The local IPO market builds on the strong momentum seen in the final quarter of last year, which Adelaide-based advisory firm HLB Mann Judd said accounted for 68% of 2020 listings.

Apart from low rates and economic rebound, another factor driving the boom is the "two-fold entry" of retail investors, said Brad Smoling, managing director at Smoling Stockbroking.

"Now is a good time to do an IPO... You've got the older participants seeking higher returns as interest rates remain very low. Then you have a new generation of tech-savvy younger investors, with information at their disposal." ($1 = 1.2844 Australian dollars) (Reporting by Shruti Sonal in Bengaluru; Editing by Subhranshu Sahu)