Elanor’s new 7.10% corporate bond

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06 October 2017

Elanor Investors Group (ASX code: ENN), has announced it has finalised the issue of $40 million worth of unsecured notes. Elanor’s note issue makes the Australian property investor and funds management company the latest addition to a growing list of local companies without credit ratings which have raised funds by issuing high yield bonds in Australia.

The company intends to use a proportion of the proceeds to invest in two new projects. One is the seeding of its $80.6 million Elanor Metro and Prime Regional Hotel Fund which will comprise a portfolio of three hotels. The other is its $60.35 million Bluewater Square Syndicate fund.

Although bond yields have risen by nearly 1% over the last year, interest rates are still a lot closer to historically-low levels. As such, the search for a higher rate of interest has taken some investors into higher-risk assets such as those issued by unrated issuers. The notes have a 7.10% coupon and they will mature on 17 October 2022.

The 7.10% coupon is under the 7.50% – 9.00% range established over the last three years by similar unrated issuers and it is significantly lower than StockCo’s 8.75% coupon set on its callable notes issued in 2016.

As with most, if not all, of these unrated bond and note issues, the offer was open only to eligible sophisticated investors in accordance with the Corporations Act.