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.
Click here to access our Full Research Report. Click here to view the Prospectus.
