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New Issue: Challenger Capital Notes 2

On 28th February 2017, Challenger Ltd (CGF) announced a new issue namely Challenger Capital Notes 2 (prospective ASX Code: CGFPB). The purpose of this transaction is to provide Regulatory Capital for the group but more specifically, it will be treated as additional Tier 1 capital. The indicative size of the offer is [$350 million] but CGF retain the ability to change the issue size.

The notes will be offered to eligible holders of ordinary shares or Challenger Capital Notes 1 (Securityholder offer), and through a Broker Firm and Institutional offer. These securities are structured as perpetual, unsecured, convertible, transferable, redeemable and subordinated notes.  Distributions are expected to be discretionary, fully franked, floating rate, non-cumulative and subject to payment conditions. Interest payments will be paid quarterly in arrears at a rate equal to 90- Day BBSW plus an interest margin determined under bookbuild (guidance range of 4.40-4.60%), multiplied by (1 –Tax Rate). If a distribution is not paid, the issuer is prevented from paying any distributions to ordinary shareholders until a full distribution is paid on a subsequent payment date.

Summary details of the transaction are listed in the table below:

Product Types Capital Note Last Price $100.00
Issue Size* [$350,000,000] Accrued $0
Par Value $100 Capital Price $100.00
Fixed / Floating Floating Running Yield** [6.178-6.378%]
Payment Frequency Quarterly Yield to Maturity*** [7.071-7.271%]
Current Distribution** [6.178-6.378%] Trading Margin* [4.400-4.600%]
Issue Margin**** [4.400-4.600%] Optional Call Date 22 May 2023 (6Y)
Franking Credits Inclusive Yes Legal Final Maturity 22 May 2025 (8Y)
ASX Listed Yes (Prospective ASX Code: CGFPB) Next Ex-Date
Convertible Yes Next Payment Date 22 August 2017
GICS Sector Insurance Next Cash Distribution**** $1.11

*Issue size is expected to be $350 million but is subject to change  **Based on prospective issue margin below plus 90-Day BBSW of ~1.778%. ***Based on prospective issue margin of [4.400-4.600%] & interpolated swap rate to the call of ~2.671%. ****Actual cash amount based on $100 face value.


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