Elders announced an on-market buyback for it ASX-listed subordinated notes (ASX code: ELDPA) issued at $100 in 2006. Elders chief Mark Allison said the offer “provides an opportunity for holders who wish to sell to do so on a first-come, first-served basis.” Elders would have preferred to acquire the hybrids through an off-market offer but was prohibited from doing so under the Corporations Act. The distributions on the unsecured notes were set at BBSW + 2.20% but Futuris, as it was known then, ran into trouble with it vehicle division and distributions ceased in 2009 and have not been paid since. At one stage in July 2013 the notes traded briefly down to $8. Steve Anagnos from Shaw & Partners said, “Utilize this liquidity event, particularly as the hybrids are currently not paying any distributions and are a perpetual security with no maturity date.” Philip Bayley from Australian Debt Capital Markets has suggested an alternative view might be worthwhile. As it stands, Elders cannot pay a dividend on ordinary shares until a full annual distribution is made on the ELDPA’s. The recent interim results announced by Elders create the suggestion that dividends might be reinstated in fiscal 2017. This might see the notes trade back to, or above $100 from the $80 buy-back price – a further 20% return.
Investors wishing to take advantage of the buyback need to decide quickly as Elders will be standing in the ASX market as a buyer at $80.00 until $30m worth are purchased.
