New bonds to pay around 7.50%

02 May 2016

Peet, the 120 year old ASX-listed land developer, has just announced the launch of Peet Bonds, a new series of unsecured debt securities. They will be the second series of bonds to be issued under the Commonwealth Government’s 2014 simple corporate bond legislation, the first being Australian Unity’s 2020 bonds which were issued in November/December last year.

Peet plans to raise $75 million from the bond issue, $50 million of which will be used to pay for its convertible notes maturing on 16 June 2016 (but below the conversion price level). The new issue is a straight bond issue and will have a maturity date on 7 June 2021 with an annual coupon to be determined by an institutional book build process. The indicative interest rate will be around 7.50% pa and the bonds will be tradeable on the ASX.

Peet does not have a credit rating and the indicative rate puts it in a similar yield range to other recent debt issues by other unrated corporates. Recently, BB/Ba2-rated BlueScope issued bonds with a 2018 call date at 6.50% and unrated Capitol Health issued 4 year bonds at 8.50%. The fact that Peet has been in business for over a century and has a proven ability to ride out cyclical property downturns is a factor likely to be taken into account by investors.

The upcoming maturity of the convertible notes and the planned issue of bonds comes at a fortuitous time for Peet. Benchmark interest rates are at 60 year lows, allowing Peet to issue bonds at a yield considerably lower than at any other previous time.

The offer is not open to the general public and the bonds are only available to existing convertible noteholders, shareholders, clients of the underwriters and employees. NAB is the underwriting broker but other stockbroking firms dealing in bonds such as Bell Potter, Evans and Partners, Shaw and Partners and RBS Morgans, to name a few, may be able to arrange an allocation.

The closing date for the issue is 27 May, 2016 and the bonds will commence trading on the ASX on 8 June 2016.