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|
|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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