Contact Energy has detailed the terms of its offer of $150 million of NZDX listed capital bonds to retail investors.
The "unsecured, subordinated, redeemable, cumulative, interest bearing debt securities" (see here for a description of different types of bonds) will have a quarterly coupon, fixed for 5 years, and will be able to increase the issue size to $250 million.
The coupon will be at least 8.00% per annum but may be higher (see our new issue page for details).
According to Contact the issue will "further optimise its capital structure through increasing financial flexibility and extending its term funding profile." The legal maturity of the bonds is in February 2042 but they can be redeemed early from February 2017. If they are not called early, the bonds will reset at a margin that is 0.25% higher than the initial margin.
The offer is expected to open on 23 November 2011 and close on 15 December 2011 at midday.
Update
Standard & Poor's has assigned a 'BB-' long-term issue rating to the issue. It also gave the bonds "high equity credit" which means that it will treat them entirely as equity. A key feature of the bonds which S&P highlighted was a "mandatory deferral of interest for up to five years if the long-term corporate credit rating on Contact falls to 'BB' or below". Contact's current corporate credit rating is BBB/Stable.
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