AMP’s new Capital Notes 2 hybrid has a final issue size $267.5 million. The initial yield for the first quarter is the bank bill rate (2.27% pa) plus the fixed margin of 5.10% pa. The total yield includes a franking component of 85%, the same as AMP shares. Each quarter the yield will be reset based on the 90 day bank bill rate plus the fixed margin of 5.10%. The initial yield in the hands of investors works out to 5.4021% plus franking (at 85%) or around 7.37% grossed up.
The indicative distribution rate for the first distribution period ending on 22 March 2016 is 5.4021% pa. This is determined under the terms as follows:
- bank bill rate (90 day bank bill swap rate on 30 November 2015): 2.27% pa
- plus margin: 5.10% pa
- indicative franking adjustment factor of 0.732984
- indicative distribution rate: 5.4021% pa. The interest payment covers a period of 113 days from 30 November 2015.
For those confused about some of the terminology and yields on hybrids, an explanation can be found here.