Summary: New ASX-listed note issue from Centuria Capital; indicative range for issue margin from 4.25% to 4.50%; secured, unsubordinated; April 2026 maturity date; three call dates.
Centuria Capital, a real estate investment manager in industrial and office property listed on the ASX, had previously chosen to issue bonds in the “over-the-counter” market. However, it has now announced its subsidiary, Centuria Capital Number 2 Fund, will issue a new series of notes to be listed on the ASX. The announcement is a welcome one as the ASX-listed universe of corporate bonds and notes has been shrinking in recent years as securities mature without replacement issues.
Centuria is seeking to raise $100 million through the issue of Centuria Capital Number 2 Fund “Notes” (ASX code: C2FHA), with the ability to raise more or less than this amount. The notes will be secured securities which will pay a floating rate of interest.
The proceeds will be used to fund the redemption of its existing April 2021 notes as well as Centuria’s “co-investment programme”, “strategic acquisitions” and “growth of its unlisted property funds division.”
The new notes have an indicative distribution rate equivalent to 3 month BBSW plus a margin which lies in a range of 425bps to 450bps. The final margin will be determined by a “book build” and the result will be announced on 29 March 2021. A book build is a tender process managed by investment banks on behalf of the issuer in which investment institutions each place bids for a set volume at a price/yield. (This is the same way as the AOFM holds tenders to sell government bonds each week). If history is any guide, then the margin is likely to be set at the lower end.
The notes will be unsubordinated, secured and interest payments will be made quarterly. Should interest not be paid within 3 business days of a payment date, the issuer will be in default.
The notes will have a 20 April 2026 maturity date but they will be callable in a similar fashion to earlier, unlisted series. The new notes will have call dates in October 2024, April 2025 and October 2025 and the issuer will have the option to redeem the notes on any of these dates.
Standard market convention typically dictates the notes will be “called” on the first call date in October 2024. However, Centuria must pay a 1% penalty should it call the notes on the first call. There is not a penalty for calling the new notes in either April 2025 or October 2025.
The bonds may be redeemed earlier than the call dates or the maturity date in limited circumstances. Following a “change of control” event, holders may force redemption prior to the maturity date. A similar process takes place should certain tax events or a change of control occur. Additionally, the issuer may redeem the notes following certain types of asset disposals.
