On the 22nd of March 2017, Villa World Limited (ASX: VLW) announced a new issue, Villa World Bonds (Prospective ASX Code: VLWHA). The bonds are expected to be issued on the 21st of April 2017. The minimum size of the offer is $50 million but will change based on demand, and the proceeds from the transaction will be used to grow inventory through acquisitions and joint-venture opportunities. Villa World Limited develops, constructs, and sells residential land and buildings along the eastern coast of Australia. The group offers two major products, its turnkey ‘house and land’ package and land estates, which are primarily targeted to the owner-occupier market as well as local investors and builders. The bonds are structured as simple corporate bonds meaning they have no optionality and interest payments are mandatory. To qualify as a simple corporate bond, this security has met specific legal eligibility requirements on the issuer and the security. The bonds are protected by event of default conditions which give the holder the right to recover any unpaid principal or interest subject to issuer solvency. The simple corporate bond regime does not allow noteholders to be subordinated to unsecured creditors. The notes are guaranteed by the issuer and all wholly-owned subsidiaries of the issuer. Interest payments will be paid on a quarterly basis based on a calculation equal to 90-Day BBSW plus an interest margin in the range of [4.75 – 5.00%] set through bookbuild. The bond may only be redeemed by the issuer on its legal final maturity date (21 April 2022) or when a Tax Event, Change of Control Event or a Clean Up Condition exists. Bondholders have the right to early redemption only if the Change of Control Event occurs. Bond holders are protected by a series of covenants such as a negative pledge (net secured debt cannot be more of 40% of total adjusted assets) and restrictions on indebtedness (net total debt cannot be more than 50% of total adjusted assets). Summary of the Transaction:

Product Type Simple Corporate Bond Last Price $100.00
Issue Size* [$50,000,000] Accrued $0
Par Value $100 Capital Price $100.00
Fixed / Floating Floating Running Yield** [6.54 – 6.79%]
Payment Frequency Quarterly Yield to Maturity*** [7.38 – 7.63%]
Current Distribution** [6.54 – 6.79%] Trading Margin** [4.75 – 5.00%]
Issue Margin** [4.75 – 5.00%] Optional Call Date
Franking Credits Inclusive No Legal Final Maturity 21 April 2022 (5Y)
ASX Listed Yes (Prospective ASX Code: VLWHA) Next Ex-Date
Convertible No Next Payment Date 21 July 2017
GICS Sector Real Estate Next Cash Distribution**** [$1.64 – 1.69]

*Issue size is subject to change but expected to be $50 million. **Based on prospective issue margin plus 90-Day BBSW of ~1.795%. Actual margin to be set at bookbuild ***Based on prospective issue margin & interpolated swap rate to the call of 2.6351%. ****Actual cash amount based on $100 face value.

Click here for the Announcement. Click here for the Offer Prospectus. Click here for the Base Prospectus. Click here for the Investor Presentation.