Peet Ltd has announced its intention to issue $50 million worth of simple corporate bonds (ASX code: PPCHB). Peet’s core business is the development of residential communities across Australia. The proceeds will be used for general corporate purposes including the reduction of its bank facility debt.
Simple corporate bonds must have a term not exceeding 15 years, they must not be convertible, they must be denominated in Australian dollars and they can only redeemed early in limited circumstances. Readers interested in the full set of features required by the ASX for a bond to be defined as a simple corporate bond, click here.
The new bonds, which are deemed to be unsecured notes under the Corporations Act, will pay around 6.40% to 6.50% (annualised) at the prevailing interest rate. 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 5 October 2022. These bonds may only be redeemed by the issuer earlier than the October 2022 maturity date should certain tax events or a takeover occur.
These new unsubordinated bonds have an indicative interest rate equal to 3 month BBSW plus a margin of 465bps to 475bps. The final margin will be determined by a book build, which is a tender process managed by National Australia Bank on behalf of Peet. If recent history is any guide, then the margin is likely to be set at the lower end. Interest will 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 (465bps) and the upper end (475bps).
