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Hybrid Securities

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ROE said:
Look like there is huge demand for The Westpac Capital Notes
it now close only a few days after it open...

cant be bad for the notes price once it floated
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Still open for holders of WBC.

Anyone holding health scope notes? They're looking like very good performers.
 
Transpacific Step Up Preference Securities (TPAPA) are looking good after a $2 rise today to $92. At this price they still offer a very attractive effective yield.

The distribution rate for the P/E 31st March will be 6.45% fully franked. This gives an effective yield of 7%.
 
MXUPA up 6% today and jumping above $90 for the first time in over 5 years.

Any particualr reason for the move or just general low IR and good market sentiment?
 
This looks interesting.

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Offer of Healthscope Subordinated Notes II – Coming Soon


The Interest Rate for each interest period will be fixed until the Maturity Date at between 10.25% and 10.75% per annum, as determined under the Bookbuild.1

The Interest Rate cannot change as it is fixed. However, additional interest will accrue if interest payments are suspended or otherwise not paid when due.

Interest payments on Notes II are fixed rate payments payable quarterly in arrears and must be paid to Holders unless interest payments have been suspended.

Any suspended interest payments are cumulative and compounding.
Interest payments will be unfranked.
Notes II have a term of 5 years, with a maturity date of 25 March 2018.
The issue price is $100 per Note II. This is also the principal or face value per Note II.
Notes II are expected to trade under ASX code “HLNGA”.

https://onlineinvesting.westpac.com.au/Public/Trading/IPOs.aspx

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I bolded the interesting part.

I got to read up on the prospectus first but it certainly looks interesting, cheers.
 
too risky .. extremely high leverage business run by private equity ....
too much of a Chanel Nine story...

11% I reckon I can make that with naked put options on solid business with much less risk..
 
ROE said:
too risky .. extremely high leverage business run by private equity ....
too much of a Chanel Nine story...

11% I reckon I can make that with naked put options on solid business with much less risk..
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Thanks for that, you could be right. Other businesses can get funding for half that rate so there must be some risk involved here, cheers.
 
Bill M said:
Thanks for that, you could be right. Other businesses can get funding for half that rate so there must be some risk involved here, cheers.
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So what's to stop paying through Ponzi!
 
Suncorp today has announced intention to issue floating rate notes. They are to replace an existing hybrid. From one of the ASX anouncements "The Margin will be determined under the Bookbuild, and is expected to be in the range of 2.85% and 3.10% per annum.". The major issued hybrids this year announced margins at the bottom of their ranges which happened to be 3.10% or 3.20% from memory. Seems SUN is aiming to get smaller margin.
 
SUN announced in the updated prospectus a margin of 2.85% - I'm interested to see how many find that appealing. I'm also surprised to see them announce a margin smaller than what some of the majors have managed.
 
boofhead said:
SUN announced in the updated prospectus a margin of 2.85% - I'm interested to see how many find that appealing. I'm also surprised to see them announce a margin smaller than what some of the majors have managed.
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Why would anyone bother?
 
I bought into AYF a couple of months ago. For want of a better term they're a Hybrid LIC.

They invest in between 15-45 hybrids.

I like the simple diversity and the yield is quite good. They pay 11.25c a share per qtr and average around 50% franking credits. On a gross dividend basis they're offering around 7.5% yield which is pretty good in this environment.

Only issue I have is that they are not a large listing and you can go a few days without any trades occurring. I do wish there were more opportunities like this, even more so along the lines of AKY which has invested in bonds. The fund has a 5 year life span and they provide capital returns as various bonds mature.

Australia is so backwards in the interest securities space, and I fear with Basel III that a lot of bank hybrid issues are going to not be so good since first call dates will no longer get APRA approval unless they can get replacement funding at lower rates. There will also no longer be step-up clauses so the banks will have little opportunity or incentive but to hold keep the hybrids till maturity.
 
I missed it yesterday, ANZ has announced new notes with expected ASX code ANZPD. Expected margin between 3.4 and 3.6 over 180 day BBSW. I expect it to follow the trend of being at the bottom end of expectations.

Business Spectator also said they expect Westpac to announce their offering soon.
 
Newbie intro..

Thanks all posters for a very informative thread, including useful links and facts.

I hold hybrids inside and outside SMSF and am basically buy & hold. Bought MQCPA, WBCPB and ANZPA on issue, (MQCPA just redeemed - I chose cash out). Also entirely lost a trivial amount punted on BNBG at a few cents in the dollar.

Currently looking to park more in interest bearing securities rather than equities in the medium term hence renewed focus on hybrids and notes.

One idle question about RHCPA - doesn't RHC have the right to call on any payment date, and hence deliver a substantial capital loss to anyone buying at current levels >$104 ?
 
Presumably the answer re RHCPA is that funding at BB+4.85% would be hard to replace, and that they are expected to continue to need this funding for quite a few years yet. For RHCPA holders to be repaid face value in (say) 2014 would be a disappointment to them.
 
New offer is out now, Suncorp CPS 3. I might buy some of these as I am an existing floating rate holder and can get in on the IPO.

A similar stock with the same margin is ANZPD and today they are trading at $102.15. That could be an indication of where the price might go.

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https://www.fool.com.au/2014/04/03/suncorp-group-ltds-convertible-preference-share-offer-what-you-need-to-know/

The issue price for these convertible preference shares, referred to as CPS3, will be $100 each. The minimum investment is $5,000. CPS3 holders will receive dividend payments quarterly, starting on 17 June 2014.

The dividend payment will be based on the 90-day bank bill swap rate (BBSW) plus a 3.40% per annum margin rate, which was set in the bookbuild completed 1 April. The bank bill rate on the first business day of the relevant dividend period will be used for calculation. Dividends will be adjusted for Suncorp’s tax rate.
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Bill, does this actually work out to be a higher yield than if you just bought SUN shares with usual dividend and franking credit? The latter would be grossed up around 7.5%.
 
Julia said:
Bill, does this actually work out to be a higher yield than if you just bought SUN shares with usual dividend and franking credit? The latter would be grossed up around 7.5%.
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You would expect a hybrid to have a lower yield given the debt/equity nature of them.
 
Julia said:
Bill, does this actually work out to be a higher yield than if you just bought SUN shares with usual dividend and franking credit? The latter would be grossed up around 7.5%.
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I don't have SUN shares but I do have the SUN floating rate notes which entitles me to an allocation to the IPO. I know the SUN FPO stock yield is higher but I am not interested in it. I prefer hybrids, convertible notes and floating rate notes at this time so I will be sticking to them, cheers.
 
Bill, I wasn't questioning your choice. Just curious about why you prefer the hybrids to ordinary shares.
 
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