Just one day after Suncorp announced it would be issuing a new series of ASX-listed hybrids, it has announced the margin on its new capital notes (ASX code: SUNPF). The company had initially sought to raise $250 million, an amount brokers described as on the small side but after Suncorp received additional demand for the hybrids, the book-build was closed earlier than scheduled and the company allocated $300 million under the broker firm and institutional offers. The final size of the issue will depend on the amount allocated under the eligible security-holder offer.
It has been some years since a margin was set not at the bottom of an issue’s indicative range and Suncorp did not upset this pattern. The indicative range was 4.10%-4.30% and hence the margin was set at 4.10%. When this margin is added to the current 3 month bank bill swap rate (BBSW) of 1.80%, investors can expect around 5.90% annualised, inclusive of franking credits, for the first quarter and thereafter if BBSW rates do not alter materially. BBSW is typically at a fairly small margin to the RBA’s official cash rate which is currently 1.50%.
The chart below shows the trading margins of existing hybrids which are already listed on the ASX. In very simplified terms, a security’s trading margin is the sum of its annualised distributions as percentage of its price less BBSW. (In practice, unrealised annual capital gains/losses and accrued distributions are also taken into account.)
As at the close of business 27 March 2017.