Fixed income broker Evans and Partners thinks the bonds issued by litigation funder IMF (ASX code IMFHA) might be worth a look. In a recent note to clients E&P pointed out the bonds were issued in 2014 at a 420bps margin to BBSW. “The trading history as below shows the margin widened in 2016 to well over 5% at times. This was a function of a falling share price over 2015 (especially late) and poor credit markets in the first quarter of 2016. Subsequently the markets and the share price have recovered strongly with the share price up 30% so far in 2016. The notes margin has just started to improve and given the thirst for yield [it] may have some more room to fall to levels seen in 2014.” On current trading margins the yield is around 6.50%. Investors will note that the recent ANZ hybrid was issued at an initial yield of around 6.45% and might ask why the IMF bonds would seem appealing. One of the answers lies in the fact that the IMF notes are a senior debt obligation and therefore higher in the capital structure than the ANZ hybrid.
Here’s another chart as at 24 August for the sake of comparison with other notes trading on the ASX.
