Articles
Perpetual fixed interest investments have been a nuisance for some investors, as of late they have been re-setting their interest rate lower, and falling in value at the same time. The ANZ 9.66% Perpetual Bond - ANBHA could be next.
In April 2013 the ANZ will, either repay the bond at its $1 face value or re-set it for a further 5 years. If re-set today the new interest rate would be 5.42%pa.
Because it's uncertain whether ANZ will repay the bond (and possibly unlikely if the track record of other perpetuals are taken into account) it may be prudent for investors to SELL the bond, preserve capital, and move into other upcoming bond offers. Otherwise investors could be left holding onto a capital loss and a low interest rate.
This ANZ bond could follow other perpetuals which have fallen in value after a lower interest rate re-set. As an example Quayside Holdings Perpetual re-set its interest rate from 10%pa to 5.42%pa. The result was its price fell from $1 to 86c today.
Perpetual instruments such as these have caught many investors unaware.
If you have a short term investment horizon and hold this bond in your portfolio you may wish SELL the ANZ 9.66% Perpetual Bond - ANBHA and moving into upcoming new bond offers.
Last Sale at time of writing - $0.99
IRG's View on The APN News & Media Bond – The Opportunity:
IRG has identified an opportunity which we believe may appeal to some income investors. The investment is with a major Australasian Media Company and is a fixed rate, unsecured, unsubordinated bond with a maturity date of March 2016. So essentially a 4½ year term. The bond is repayable in cash at maturity – no perpetuals, no interest rate re-set, no conversion into shares in the company.
Bond key features:
- Quarterly interest payments
- Maturity date of March 2016 (early redemption possible at the Company's option)
- Fixed rate, unsecured, unsubordinated bonds which rank equally with all other unsecured, unsubordinated indebtedness of the company (including unsecured, unsubordinated bank debt)
- The Bonds, and all payments to be made in respect of them, will be guaranteed by the members of the Guarantor Group on an unsecured, unsubordinated basis
- The bonds principal and its interest payments are denominated in New Zealand dollars
Company features:
- A leading Australasian Company
- The largest Company of its kind in New Zealand
- One of the largest Companies of its kind in Australia
- Owns household brand names across New Zealand and Australia
If you are interested please phone Jonathan or Andrew on 0800 867 323 to place your order.
As we expected Quayside Holdings Perpetual Preference shares (QHLHA) have been reset to 5.42% for the next three years until 12 March 2014.
Back in July 2010 we suggested that you might want to sell your Quayside Holdings Perpetual Preference shares (click here for original article). At that time QHLHA were trading at 97.25 cents. The last sale before the reset on 11 March 2011 was 85 cents. We expect the price to fall further.
So what does this mean for investors?
Many investors wont realise that their income from QHLHA securities will nearly halve until they receive their first dividend payment at the new rate on 12 June 2011. We expect further weakness in the price.
OnePath Wins Morningstar KiwiSaver Fund Manager of the Year
We are delighted to inform you that on 2 February 2011 OnePath's funds management team won two significant accolades in the Morningstar awards. OnePath won in two categories-most importantly the Morningstar KiwiSaver Fund Manager of the Year and also the International Equities Award backing up their win in 2009. They now hold both the Morningstar and FundSource, KiwiSaver Manager of the Year awards for 2010.
OnePath should be especially proud of the KiwiSaver award as this recognises a number of different factors including the performance of the funds, the level of customer service and delivering educational and easy to understand communications to all their members. They are deeply committed to meeting the needs of more than 1 in 5 New Zealanders enrolled in their KiwiSaver schemes. This award further reinforces OnePath's position as one of New Zealand's leading KiwiSaver managers.
We are particularly pleased as it validates our decision back when KiwiSaver started to select OnePath (then ING) as our primary KiwiSaver provider.
The International Equities award is testament to the capability in OnePath's investment team. They have a long track record of achieving awards and this year's success at Morningstar confirms the continuing stability and expertise of their team.
These awards demonstrate the expertise behind the OnePath brand.
If you haven't already signed up for KiwiSaver or want to change your provider please contact us on 07 578 3863, 0800 867 323 or email This email address is being protected from spambots. You need JavaScript enabled to view it.
The price of Quayside Holdings Limited Preference Shares (QHLHA) has fallen to around 96 cents.
The interest rate will be re-set March 2011, at 1.7% over the 3 year swap rate which is currently 3.95%. If they were re-set today the rate would be 5.65% and that would then be locked in for the next 3 years.
To estimate what the effect of the reset may have on the market value of Quyside we can look at the price of other local authority paper. Manukau City currently has a bond in the market which is set to yield between 6.35% to 6.75% per annum. We can use this as a proxy for local authority paper to indicate what Quayside may trade at. If Quayside was to return 6.35% to investors the capital price will fall to 83 cents and if it is to return 6.75% then the capital price will fall to 88 cents. Perhaps you should talk to us about the impact this could have on your portfolio - phone us on 07 578 3863.
The Quayside Holdings Limited Preference Shares (QHLHA) currently pay a coupon of 10% and continue to have sound credit worthiness. At the time of writing, 19 July 2010 they are trading at 97.25c which is close to par value. However, given recent economic developments and the likely path of interest rates in New Zealand over the next 12 months we now have concerns about the medium term value of these shares.
The Quayside Preference Shares will reset their interest rate based on the 3-year swap rate (currently 4.39%) in March 2011. If the rate on the preference shares was reset today, 19 July 2010, the interest payable would drop from 10.0% to about 6.09%. This would lead to a commensurate drop in the market value of the shares. Interest rates will almost certainly be higher in March 2011 but the 3-year rate is very unlikely to be high enough to allow the rate on the Preference Shares to be reset at anywhere near the current 10%. To do so it would have to rise by nearly 4% to 8.3%. Our guess is that the reset will lead to a new rate for the Preference Shares of about 7.5% and at that rate we expect the price to settle somewhere around 75c, perhaps sooner rather than later.
It may be worthwhile to sell the Quayside Preference Shares while their values remain high and to purchase a debt security that is reset annually. We have seen annual reset securities trade at significant discounts throughout this year and represent better buying as they should benefit from rising short term interest rates.
Should you wish to continue to hold Quayside please note that we have no concerns about their creditworthiness however you should note that you are very likely to experience lower cash flow returns for the three years after reset in 2011 and a drop in their market value. The latter becomes a concern only should you wish to sell.
Please ring your adviser (or Andrew Parkinson if you don't have one) on 07 578 3863 or 0800 867 323 to discuss how the above affects your individual circumstances and discuss a suitable alternative recommendation.