The yield on Origin Energy Notes (ASX code: ORGHA) has fluctuated wildly over the past year in response to the state of its balance sheet and/or their expected redemption date. The notes have a call date in December 2016 but their final maturity date is in 2071. It is understandable for the price and yield to move considerably when investor sentiment shifted from expecting a redemption in 2016 to some undetermined date or vice versa.
Origin has given strong hints as to its intention to redeem its notes for some time. As far back as September 2015 when Origin had an equity raising, Origin investor presentations assumed the Notes would be redemed on the first call date in December 2016. However, without an official announcement, investors have factored in some probability of a change in conditions and as a consequence, a delayed redemption.
Finally Origin has confirmed it will redeem the notes this year. In a notice to the ASX, it said “it intends redeem, in whole, all of the Origin Energy Subordinated Notes” on 22 December, 2016. Holders who are on the register on 16 December will receive $100 plus $1.43 interest.
The notes’ yield fell immediately on the news as the price jumped above their $100 face value. At the closing price of $100.75, Evans and Partners calculate the yield to maturity is just short of 7% (annualised).
Trading is expected to cease on 13 December.