Villa World has announced its intention to issue $50 million worth of simple corporate bonds (ASX code: VLWHA). Villa World’s core business is the development of residential communities in Queensland, New South Wales and Victoria. The proceeds will be used for the acquisition of new residential property development sites, strategic acquisitions and JV opportunities along the east coast.
The new bonds, which are deemed to be unsecured notes under the Corporations Act, will pay around 6.55%-6.80% (annualised) at prevailing level of interest rates. As interest rates change, specifically the bank bill swap rate, quarterly payments will also change and the annualised rate will also vary. The scheduled maturity date is 21 April 2022. These bonds may only be redeemed by the issuer earlier than the April 2022 maturity date should certain tax events or a takeover occur.
These new unsubordinated notes have an indicative distribution of BBSW plus a margin of 475bps to 500bps. The final margin will be determined by a book build, which is a tender process managed by investment banks on behalf of Villa World. If recent history is any guide, then the margin is likely to be set at the lower end. Distributions are to be paid quarterly in arrears and are not cumulative.
The chart below shows the history of issue margins of ASX-listed notes over the last eight years, including the GFC period in 2008/2009. The new notes are shown at both the lower end of the indicative margin (475bps) and the upper end (500bps).
