ANZ Banking Group is issuing the notes at a face value of $100 each.
ANZPD is set to pay distributions equal to the 180 day bank bill rate (floating rate currently at 2.82%) + a margin of 3.4 – 3.6%.
As such the current distribution rate would be between 6.22% and 6.42%.
Payments are set to be made on a half yearly basis, payments will not be made were the payment would result in ANZ trading insolvent or having insufficient tier one capital.
ANZPD distributions will be made in preference to the dividend of ordinary shares. Where a payment cannot be made, it is non-cumulative; as such the payment will never be paid.
ANZ offers no guarantee that the notes will ever be redeemed or converted.
It is possible that the notes will trade perpetually. It is however likely that they will be converted when the mandatory conversion conditions are met in September 2023; mandatory conversion will occur after September 2023 when the VWAP is greater than 56% of the issue VWAP.
Upon mandatory conversion, holders will receive $101 worth of ordinary shares. If ANZPD is no longer considered tier 1 capital, ANZ has the option to redeem ANZPD as early as September 2021. Upon optional redemption holders will receive $100 in cash.
Capital notes paying a comparable yield such as CBAPA (90d + 3.4%) or ANZPC (180d + 3.10%) are trading at a premium to their issue price, 1.62% above and 1.55% above respectively. These notes do however have mandatory conversion dates which are much sooner (2014 and 2017).
Ordinary ANZ shares historically pay a gross yield of 7.6%.
There are better income and growth opportunities in the market right now, however, if you are looking for solid income over the next 10 years and not concerned with capital growth then these notes may suit you.
For more information on ANZ Capital Notes (ANZPD) please contact us on 07 4771 4577.