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BIRMANBOY
09-03-2015, 03:11 PM
Anyone getting any of these? I have reserved some since my bonds portfolio has been sold down over the last year. Has been some cautionary articles about them but still reasonable return for not too much risk in my opinion.

Sideshow Bob
09-03-2015, 04:03 PM
Anyone getting any of these? I have reserved some since my bonds portfolio has been sold down over the last year. Has been some cautionary articles about them but still reasonable return for not too much risk in my opinion.

I've put my name down for a few, as have some other bonds maturing very soon. Wasn't sure reading the broker blurb if they were over-blowing the risk and just having to explicitly state everything these days. S&P's rating was the lowest you can get without getting into junk. ;)

BIRMANBOY
09-03-2015, 04:18 PM
As you say...disclaimers, a*** covering and sundry buts and howevers. BBB- is still reasonable though and a high class of "junk" one might think. Highly unlikely that ANZ will be joining the Prominvestbank of Ukraine in having to offer 24% for term Deposits. 7.2 % sounds downright conservative in comparison:p
I've put my name down for a few, as have some other bonds maturing very soon. Wasn't sure reading the broker blurb if they were over-blowing the risk and just having to explicitly state everything these days. S&P's rating was the lowest you can get without getting into junk. ;)

Okebw
09-03-2015, 05:53 PM
Just had a quick look on the CIP website at the offer. To say I wouldn't touch these things with a barge pole would be a massive understatement.

''Interest Payments are scheduled to be paid quarterly but are subject to ANZ’s discretion. Interest payments are non-cumulative. This means that if ANZ does not pay interest on an Interest Payment Date, ANZ will not pay you that interest on a later date. ''

''Depending on the circumstances, the ANZ Capital Notes may be repaid, converted into ordinary shares issued by Australia and New Zealand Banking Group Limited (ANZBGL), or written off. The Capital Notes would only be written off if conversion was unable to take place.''

The fact that the felt the need to put either of these clauses in the offer is a massive red flag to me

macduffy
09-03-2015, 07:08 PM
Do you really think that ANZ would ever exercise discretion not to make an interest payment that was due? That would be tantamount to declaring that they were going out of business, not just in NZ which is probably about one eighth of their operations, but totally. OK, nothing is without risk but these are as low risk as just about anything in this part of the world. If I weren't overweight Aussie banks I'd be looking to having a few. But DYOR of course.

kiwitrev
10-03-2015, 02:36 PM
Okebw
The language you refer to is pretty much standard for companies offering a new issue of bonds. If you do some research on the offer docs of any large insto. you will find this to be so. It really is just about "covering all the bases" in case of some unforseen circumstance.

Beagle
10-03-2015, 03:33 PM
According to Chris Lee's blurb on these they require the above clauses, (which I also find objectionable) to comply with the new Basil 3 capital requirements. Effectively these represent an equity risk but you only get a fixed interest return. He went on to say that these are also loss absorbing instruments or words to that effect...
Equity risk for a fixed interest return is never a good deal in my book.
Disc -Own HNZ shares and would buy more of them or shares in ANZ bank itself, (presently none owned), over these.

GTM 3442
10-03-2015, 05:45 PM
Worldwide, banks are under pressure from regulators to increase their capital/equity.

The end result of these ANZ Capital Notes is to increase their capital/equity. This makes regulators happy.

I believe that "traditional" bonds do not count toward equity. This does not make regulators happy.

So I expect to see more Capital Note issues for the general public (highly subordinated, well back in the queue for payment if things go all squidgy and pear-shaped).

And I expect to see more "covered" bonds not available to the general public (not subordinated, well to the front of the queue for payment if things go all squidgy and pear-shaped).

In this case, I think that the selling point is 7.2% for a "blue chip" security available to the general public. Who possibly don't realize where they stand in the queue, should things go all squidgy and pear-shaped.

The "non-cumulative" aspect is the turn-off for me.

BIRMANBOY
10-03-2015, 07:39 PM
Cutting through all the clauses, sub-clauses and what ifs..you are left with the basic question...How likely is the ANZ to default...is it more likely or highly unlikely. The answer has to be highly unlikely, surely that is self evident. Catastrophic events could happen of course but if the ANZ and or any of the major banks go belly up you can guarantee that a major **** storm has struck and the rest of the financial world including the stock exchanges are also in similar positions. My understanding is that the Oz banks are in good financial health and are in a different space than previous US banking collapses. As always..pays to be diversified and spread the risks but on the face of it I cannot see any more risk here than all the other countless places to put your money. Some people scoff and say there is no such thing as "too big to fail", but the ANZ is in good health and I see no reason to believe otherwise.

Beagle
13-03-2015, 09:33 AM
I think the above two posts sum the situation up very nicely. My perspective as outlined above is that with a stock like HNZ with projected fully imputed dividends of 7.5 cents / 0.72 = 10.41 cps gross you're getting a 7.8% dividend yield this year and its highly likely that EPS and dividend growth will continue for the next 5 years at a fairly reasonable pace so seeing as you're effectively taking an equity risk with these ANZ instruments you might as well get the superior equity return with HNZ who's divvies could grow at circa 10% per annum and SP could easily double in the next five years.
Therein lies the fallacy of this investment...equity risk for a modest fixed interest return. As GTM 3442 suggested I think there's an awful lot of people investing in this that don't fully understand that they're effectively taking an equity risk. I know one of them personally that's putting in $100K and talking to them and telling them the risk was like pouring water on a duck's back. All they see is ANZ and 7.2% and think its easy money.

macduffy
13-03-2015, 12:15 PM
Fair comment, Roger.

It only makes sense once a decision is made in favour of investing in ANZ over, say, HNZ. A Kiwi investor is unlikely to get much benefit from imputation/franking from ANZ; the ANZ shareprice is pretty much at an all-time high; current dividend yield is around 4.5% and likely capital requirement constraints will limit future dividend increases for a few years at least.

I hope your contact is investing in the context of his/her $2m-$3m diversified portfolio!

GoldenStag
17-03-2015, 01:58 PM
I looked into these while taking an interest in perpetual hybrids recently...

I was reading up on these notes and the outlier risks to purchaser were horrible. I've read that these are referred to as loss absorbing instruments i.e. the investors absorb the loss for the issuer if things go wrong. This is one of the reasons it can be counted as Tier 1 capital these days, because ANZ don't have to pay the money back in almost any situation (non-cumulative, optional payment, share conversion whenever they want etc etc).

But the good thing I found is on page 18 and 19 of the investment statement. It has a table which compares the notes to the ANZ Perpetual Notes which is what I was originally interested in. The Perpetual notes rank properly, and their list of features is excellent. The table makes it quite obvious how much better they are. This made me more convinced that the perpetuals are the way to go.

I still think there is a place for these notes, and I doubt ANZ will go south any day soon, but not a giant allocation in the portfolio.

GS

Grimy
18-03-2015, 07:17 PM
I've applied for a few. I understand the risks of Tier 1 & 2 capital-part of the fall-out of the GFC. If ANZ gets into enough trouble that I won't be repaid then I doubt if many of my other investments will be looking too healthy anyway....
I have bonds/shares/property, so just a bit of diversification.

BIRMANBOY
19-03-2015, 11:25 AM
I have placed an order too..feeling optimistic about ANZ and after 30 years of dealings they have never let me down yet. However just a few implements out of the family silver drawer as too much in one place just makes issuers complacent.

mcdongle
19-03-2015, 04:53 PM
Ive got some as well, Its getting harder to find good rates of interest.

Been told BNZ have a tier 2 offering soon.

Grimy
19-03-2015, 07:25 PM
Been told BNZ have a tier 2 offering soon.

Yes, I'll be looking at that when it comes out too.

iceman
21-03-2015, 07:28 AM
I've have been thinking about this one. Talked to ANZ and they offered me a 5 year fixed mortgage at 4.99% so am thinking of taking a couple of hundie to invest in this. Small risk and easy money in my view !


I have placed an order too..feeling optimistic about ANZ and after 30 years of dealings they have never let me down yet. However just a few implements out of the family silver drawer as too much in one place just makes issuers complacent.

BIRMANBOY
21-03-2015, 09:46 AM
Personally I would never borrow to invest but I'm an old fuddy duddy and may well be an idiot.....a lot of differing views on this idea in thread on "investment strategies...folly or fortitude. Bottom line is we are all responsible for our own decisions. I am investing in these because I had sold down some of my other bonds since I thought interest rates may have been going up. I guess as long as you are not sinking all of your trust in one product its fine but a wide spread of investments always seemed like a good idea to me.
I've have been thinking about this one. Talked to ANZ and they offered me a 5 year fixed mortgage at 4.99% so am thinking of taking a couple of hundie to invest in this. Small risk and easy money in my view !

iceman
21-03-2015, 10:08 AM
I am like you BB, have never borrowed to invest other than in rental properties. Probably won't do it this time either but just thought it was interesting that ANZ offered to lend me money at 4.99% to invest with them at 7.20% :confused:


Personally I would never borrow to invest but I'm an old fuddy duddy and may well be an idiot.....a lot of differing views on this idea in thread on "investment strategies...folly or fortitude. Bottom line is we are all responsible for our own decisions. I am investing in these because I had sold down some of my other bonds since I thought interest rates may have been going up. I guess as long as you are not sinking all of your trust in one product its fine but a wide spread of investments always seemed like a good idea to me.

Beagle
21-03-2015, 10:56 AM
I am like you BB, have never borrowed to invest other than in rental properties. Probably won't do it this time either but just thought it was interesting that ANZ offered to lend me money at 4.99% to invest with them at 7.20% :confused:

I can see why this would be a perplexing situation for many and for others it would seem like easy money, which on the face of it, it is.
Let's ramp it up to illustrate my points better. Suppose you're debt free and have a lovely home in Nelson worth say $700,000 and the bank offered to lend you $500,000 to invest in these Basil 3 capital compliant loss absorbing deeply subordinated unsecured financial instruments. Suppose also you're in a good paying job and / or business and all is well for the average Joe Bloggs. Joe and his Mrs think this is the easiest 2.2% return they'll ever make and will earn $11,000 before tax for nothing right ? WRONG.

1. You are trading the security of your debt free family home for "a risk" to make that $11,000 per annum before tax, $7,370 per annum after 33% tax.
2. You are moving from a completely risk free, (assuming you're living in a part of Nelson that doesn't flood) totally secure position in your home which provides long term security for you, your wife and your children to a psotion where you're exposing them to risk.

So what's the risks ?

1. Debt servicing Risk. Well ANZ in certain circumstances don't have to pay interest on these and its non cumulating and they wouldn't if there was a serious "event". You however would still be required to pay your interest at $25,000 per annum and while this probably wouldn't greatly affect you it would smash many families budget to bits.

2. Capital Risk. They're loss absorbing so in the event of a crisis at any time over the entire life of this financial instrument, (read GFC Mk2), if in the Reserve bank of Australia's opinion it was necessary for the bank to give its shareholders "a haircut" you could see a substantial portion of your investment obliterated but of course you'd still be left holding the baby on your full $500,000 mortgage. If you got a 40% haircut, ($200k of your $500K gone, it would make the circa $7.5K per annum after tax return, look a bit silly wouldn't it !!

Now I know you're a bright and likeable guy and have your head screwed on well and truly and have a range of other quality investments and wouldn't be so silly as to do this to a level of half a mil so the above is purely for illustrative purposes for others to understand the risks, fully.

There's no free lunches in the investment world even when it appears there are !!

Now on the other hand if one were to say, yes there's risk here (as in any capital investment), but lets borrow that $200K and invest in more HNZ shares which will give better dividends and in all likelyhood dividend growth each yearand capital appreciation I think there's a far better case to be made for that sort of investment being better on a risk / reward basis, e.g. your investment could easily double (as you know it does with that company), in value in 5 years and you're being pretty well compensated for the risk involved.

Disc This poster thought he was clever and decided to partake of what appeared to be a free lunch and did what you're proposing to do on a fixed interest product prior to the GFC and got his fingers burned...once bitten twice shy !! My hair is greyer than yours mate so I just thought I'd share some of that hard learned wisdom.

BIRMANBOY
21-03-2015, 12:01 PM
Fine until the second to last paragraph....HNZ has been around a couple of years and lets face it looks ok but has no real track record or history like ANZ....Yes it MAY show capital appreciation and it MAY keep giving dividends but there is no guarantee on that continuing...its a minnow and a new minnow..I certainly wouldn't be borrowing against my house on THAT either. Caveat emptor. on everything anywhere...and forever.
I can see why this would be a perplexing situation for many and for others it would seem like easy money, which on the face of it, it is.
Let's ramp it up to illustrate my points better. Suppose you're debt free and have a lovely home in Nelson worth say $700,000 and the bank offered to lend you $500,000 to invest in these Basil 3 capital compliant loss absorbing deeply subordinated unsecured financial instruments. Suppose also you're in a good paying job and / or business and all is well for the average Joe Bloggs. Joe and his Mrs think this is the easiest 2.2% return they'll ever make and will earn $11,000 before tax for nothing right ? WRONG.

1. You are trading the security of your debt free family home for "a risk" to make that $11,000 per annum before tax, $7,370 per annum after 33% tax.
2. You are moving from a completely risk free, (assuming you're living in a part of Nelson that doesn't flood) totally secure position in your home which provides long term security for you, your wife and your children to a psotion where you're exposing them to risk.

So what's the risks ?

1. Debt servicing Risk. Well ANZ in certain circumstances don't have to pay interest on these and its non cumulating and they wouldn't if there was a serious "event". You however would still be required to pay your interest at $25,000 per annum and while this probably wouldn't greatly affect you it would smash many families budget to bits.

2. Capital Risk. They're loss absorbing so in the event of a crisis at any time over the entire life of this financial instrument, (read GFC Mk2), if in the Reserve bank of Australia's opinion it was necessary for the bank to give its shareholders "a haircut" you could see a substantial portion of your investment obliterated but of course you'd still be left holding the baby on your full $500,000 mortgage. If you got a 40% haircut, ($200k of your $500K gone, it would make the circa $7.5K per annum after tax return, look a bit silly wouldn't it !!

Now I know you're a bright and likeable guy and have your head screwed on well and truly and have a range of other quality investments and wouldn't be so silly as to do this to a level of half a mil so the above is purely for illustrative purposes for others to understand the risks, fully.

There's no free lunches in the investment world even when it appears there are !!

Now on the other hand if one were to say, yes there's risk here (as in any capital investment), but lets borrow that $200K and invest in more HNZ shares which will give better dividends and in all likelyhood dividend growth each yearand capital appreciation I think there's a far better case to be made for that sort of investment being better on a risk / reward basis, e.g. your investment could easily double (as you know it does with that company), in value in 5 years and you're being pretty well compensated for the risk involved.

Disc This poster thought he was clever and decided to partake of what appeared to be a free lunch and did what you're proposing to do on a fixed interest product prior to the GFC and got his fingers burned...once bitten twice shy !! My hair is greyer than yours mate so I just thought I'd share some of that hard learned wisdom.

Beagle
21-03-2015, 12:17 PM
HNZ have a 50% better capital ratio than ANZ and no exposure to all those hundreds of small aussie mining companies that must be starting to really struggle to service their debt with those commodities prices where they are now ...just saying.

iceman
21-03-2015, 03:38 PM
Good posts and discussions Roger and BB !

Grimy
22-03-2015, 03:38 PM
My cheque was banked last Monday. So I'm definitely in.

BIRMANBOY
31-03-2015, 08:54 PM
So listing tomorrow.
Upcoming Listings as at 31/03/2015

Company
Proposed Listing Date
Ticker
Board
ISIN
Listing and Quotation Notice


ANZ Bank New Zealand Limited (http://www.anz.co.nz/)
01/04/2015
ANBHB
NZDX
NZANBDT013C0
Click Here (https://nzx.com/files/static/cms-documents/03%2012%2015%20-%20ANBHB.pdf)

BIRMANBOY
01-04-2015, 01:43 PM
Seems to be good demand on these...trading well and close to 2 million in the buy queue. Could stag these and make a nice profit LOL

kiwitrev
20-07-2015, 04:14 PM
These bonds have been trading now for a little while and have been a good buy for those who got in on the open. Given 'normal circumstances' the biggest risk for new entrants via NZDX would seem to be that of redemption and loss of capital (ie premium paid to purchase vs face value). Interest rates have gone significantly south since these have been issued which raises the question would ANZ review and redeem at first opportunity? Perhaps none on this forum can know the answer but I would be interested for some healthy discussion on the topic. If they were redeemed early would that put ANZ in a bad light with the market in general given they may need to raise further capital as pointed out by previous posters. Also heard on the news today Aussie banks will need to increase capital even more to comply with regulators new requirements.

BIRMANBOY
20-07-2015, 07:49 PM
And yet people are still buying..makes me think..why didn't they buy at outset? However, who can say why or why not as to others timing and or motivation. With interest rates still dropping it should keep upward pressure on new entrants. Personally I don't believe ANZ would redeem early as would certainly be a "bad look". Obviously new entrants are not thinking about some sort of early redemption or the buying would have stalled. I cant remember details about their options re early redemption. However difficult for me to understand all the intricacies of global debt markets so cannot pretend to be anything other than an interested observer with some hope that they will continue for some time to come.
These bonds have been trading now for a little while and have been a good buy for those who got in on the open. Given 'normal circumstances' the biggest risk for new entrants via NZDX would seem to be that of redemption and loss of capital (ie premium paid to purchase vs face value). Interest rates have gone significantly south since these have been issued which raises the question would ANZ review and redeem at first opportunity? Perhaps none on this forum can know the answer but I would be interested for some healthy discussion on the topic. If they were redeemed early would that put ANZ in a bad light with the market in general given they may need to raise further capital as pointed out by previous posters. Also heard on the news today Aussie banks will need to increase capital even more to comply with regulators new requirements.

Beagle
21-07-2015, 03:45 PM
Fact is that wholesale interest rates have dropped significantly in the circa four months since this deeply subordinated unsecured Basil 3 capital compliant issue and that is reflected in the current premium they're trading at.
Don't for a moment pretend these don't have a serious financial risk attached to them if on a global basis we have a SHTF MK2 GFC.
The premium is further magnified by a dearth of new issues lately. All the Aussie banks are under the regulator thumb to improve their Basil 3 capital adequacy ratio's so the likelihood of ANZ redeeming these after the initial five year ? callable option is very, very low in my opinion.

macduffy
21-07-2015, 08:13 PM
ANZ has declared themselves pretty comfortable with the new APRA capital requirements.

http://www.asx.com.au/asxpdf/20150720/pdf/42zx9xdw09wq6b.pdf

But of course their idea of "manageable" may or may not involve redemption of these or any other securities.

kiwitrev
06-08-2015, 10:03 AM
And on that note ANZ today ann. raising 3B in a placement

GTM 3442
07-08-2015, 03:05 PM
And on that note ANZ today ann. raising 3B in a placement

But we only get to line up for a share of 500m

kiwitrev
07-08-2015, 03:27 PM
But we only get to line up for a share of 500m

When you say we are you talking about bond holders as well as SH? I might have missed something in the ann. but the only reference I noticed was "eligible" SH. In any event limited to $15k and not sure if NZ holders in the mix.

macduffy
07-08-2015, 04:19 PM
Australian and NZ shareholders qualify. Not bond holders. But as the current SP is below the SPP price is doesn't look as if the SPP will be rushed. Unless things change, of course.

winner69
12-02-2016, 06:59 PM
Interesting article

Things may have changed?

Mind you punters still like them - the 7.2% ANZ jobs are yielding 4% odd if you buy them today


http://www.interest.co.nz/personal-finance/79953/we-dont-have-securities-named-cocos-nz-we-do-have-bank-securities-issue-same

Beagle
14-02-2016, 06:06 PM
Interesting article

Things may have changed?

Mind you punters still like them - the 7.2% ANZ jobs are yielding 4% odd if you buy them today


http://www.interest.co.nz/personal-finance/79953/we-dont-have-securities-named-cocos-nz-we-do-have-bank-securities-issue-same

This is absolutely crazy. Do people not realise that as a Tier 2 capital note these in tandem with shares are first cab off the rank when it comes to the Reserve Bank's open bank resolution ?
Are people unaware that the ANZ bank has had the sharpest fall in its ordinary SP of any of the major Aussie banks and that they have MASSIVE exposure to the mining and dairy sectors with many of their customers unable to pay their bills ?

I thought these things were stupid at the issue price...at 4% that is a completely ludicrous situation IMO most especially in light of what is a pretty serious correction in banking shares globally. Have grannies and orphans really had the risk explained to them properly ????? or is this the next Credit Sails situation where people sue the bank for misrepresenting the risks involved ?

BIRMANBOY
14-02-2016, 08:05 PM
It would appear that you have fallen into the trap of assuming that the SP somehow is a valid indicator of a company's worth and viability and then further compounded this by making a grandiose statement "that they have MASSIVE exposure to the mining and dairy sectors with many of their customers unable to pay their bills ?".. what's the question mark for? Not quite sure of the facts so covering your nether regions? "MASSIVE" implies a dangerously large amount...where are you getting that information from? Or is it a hypothetical adjective based on your assumption that (A) mining sector has been suffering generally so therefore a majority of this sector are at the bankruptcy level...and /or (B) that the ANZ is more affected by this than Westpac or ASB etc. AND that if this is the case that they have somehow managed to hide this from everybody...except you of course. LOL A lot of stocks and shares have had their SP drop...this happens all the time and is normal. Why is it normal? Because people of similar ilk jump on and off based on emotion and the latest market sentiment. Seen it all before and no doubt will see it all again. If holders of these bonds knew anything they would be selling...appears not...so falls upon you to warn us all. Thanks. If you could back up your statement with some cold hard evidence would certainly be interested but hyperbole and panic doesn't convince me.

This is absolutely crazy. Do people not realise that as a Tier 2 capital note these in tandem with shares are first cab off the rank when it comes to the Reserve Bank's open bank resolution ?
Are people unaware that the ANZ bank has had the sharpest fall in its ordinary SP of any of the major Aussie banks and that they have MASSIVE exposure to the mining and dairy sectors with many of their customers unable to pay their bills ?

I thought these things were stupid at the issue price...at 4% that is a completely ludicrous situation IMO most especially in light of what is a pretty serious correction in banking shares globally. Have grannies and orphans really had the risk explained to them properly ????? or is this the next Credit Sails situation where people sue the bank for misrepresenting the risks involved ?

winner69
15-02-2016, 07:19 AM
It would appear that you have fallen into the trap of assuming that the SP somehow is a valid indicator of a company's worth and viability and then further compounded this by making a grandiose statement "that they have MASSIVE exposure to the mining and dairy sectors with many of their customers unable to pay their bills ?".. what's the question mark for? Not quite sure of the facts so covering your nether regions? "MASSIVE" implies a dangerously large amount...where are you getting that information from? Or is it a hypothetical adjective based on your assumption that (A) mining sector has been suffering generally so therefore a majority of this sector are at the bankruptcy level...and /or (B) that the ANZ is more affected by this than Westpac or ASB etc. AND that if this is the case that they have somehow managed to hide this from everybody...except you of course. LOL A lot of stocks and shares have had their SP drop...this happens all the time and is normal. Why is it normal? Because people of similar ilk jump on and off based on emotion and the latest market sentiment. Seen it all before and no doubt will see it all again. If holders of these bonds knew anything they would be selling...appears not...so falls upon you to warn us all. Thanks. If you could back up your statement with some cold hard evidence would certainly be interested but hyperbole and panic doesn't convince me.

Hi Birman - woken up from your nap - good for cats to snooze through a warm lazy summer?

Suppose if ANZ have suspended your interest payments and you have become the proud owner of tens of thousands of cheap ANZ shares we ALL will have many other things on our mind.

But why worry as Mark Knopfler said there should be sunshine after rain / these things have always been the same / so why worry now

BIRMANBOY
15-02-2016, 07:30 AM
Hah....I'm sure Roger would say that "Dire Straits" is a most appropriate choice. I'll go for Cream, (I like full fat dairy after all) and "the sunshine of your love"..snooze away.
Hi Birman - woken up from your nap - good for cats to snooze through a warm lazy summer?

Suppose if ANZ have suspended your interest payments and you have become the proud owner of tens of thousands of cheap ANZ shares we ALL will have many other things on our mind.

But why worry as Mark Knopfler said there should be sunshine after rain / these things have always been the same / so why worry now

Beagle
15-02-2016, 08:20 AM
I haven't got the time like Snoopy does but it seems quite obvious from ANZ's significantly more serious decline in SP relative to the other Australasian banks the market is concerned by questions about their asset quality. If people are silly enough to continue to hold these capital instruments when they could book a capital gain and get out then good luck to them.
I was actually thinking Dire Straits...Money for Nothing and..well you know the rest of the title, probably too sexist in these politically correct days.

winner69
15-02-2016, 09:04 AM
As the article said - ........focus is very much on protecting the banks. Not their investors.


No doubt Heartland will come up with something similar as well

BIRMANBOY
15-02-2016, 03:03 PM
That's amazing... wish I had your astounding abilities. "You don't have the time but yet it seems obvious"...(wow) The market decline is due to questions about asset quality (to me it looks like the market is declining in many places so how do you know its due to a specific item such as asset quality) Wow again. Holders are all silly...wow, wow wow. Sure some of us are but ALL of us...ok I guess if you say so..must be right. I retire suitably rebuked and humbled by your superior abilities. However always finish on a positive said my mum...so appreciate your comments and thanks for your wishing us good luck.
I haven't got the time like Snoopy does but it seems quite obvious from ANZ's significantly more serious decline in SP relative to the other Australasian banks the market is concerned by questions about their asset quality. If people are silly enough to continue to hold these capital instruments when they could book a capital gain and get out then good luck to them.
I was actually thinking Dire Straits...Money for Nothing and..well you know the rest of the title, probably too sexist in these politically correct days.

Snow Leopard
15-02-2016, 03:34 PM
That's amazing... wish I had your astounding abilities...

He is very good at knowing when the market is being rational (selling down Australia New Zealand Bank) and being irrational (selling down Air New Zealand).

Best Wishes
Paper Tiger
(Member of the DNRC)

Beagle
15-02-2016, 04:14 PM
But this old dog has been right about HBL and maybe, just maybe he knows a fair bit about these unsecured capital bonds. When it hits the fan you want to be at the front of the queue eating what's there first not the back accepting any mopped up mess you're offered. The Credit Sails issue promised great unsecured returns too and some of us remember how that ended.

A few months back I called the top on MTFHC's at 76, now 68 and no real depth on the buy side. Does it really make the cat's skim milk go so sour when I'm right again.
What did your mother say about sarcasm BB...

BIRMANBOY
15-02-2016, 05:04 PM
You obviously have a need to be top dog and generally regarded as Guru material Roger. Those days are gone for me...my testosterone, along with Elvis, has got up and left the building. I, along with probably many posters, look at shares and the share market as competition to compete with the financial system and to try and eke out a few more % points than what is offered at the bank. We don't look at this as being a competition among other investors. I'm happy for your wins and learn from your losses whomever you are. However when critiques are penned it is always wise to phrase them in non derogatory terms and with a softness as opposed to "you're an idiot for doing whatever".' That's just rude and to be blunt a little arrogant. I'm sure that's not the case but that's the way it comes across. You were dismissive of my request for some information to back up your claim saying "I don't have time". Ok that's fine but that then poses the question why did you post in the first place. Surely it makes sense to have some basis and facts before making a dismissive post. At a primitive, human level, we all have made decisions on what to invest in. It should be obvious that criticism needs to be well founded and robust to be accepted. Poorly researched or unfounded criticism runs the risk of being questioned, as it should be. Your example of Credit Sales although somewhat relevant is like comparing apples and oranges.....ANZ is a much larger, stronger entity. So I stand by my assertion that (A) the SP has bugger all to do with ANZ ability to withstand pressure and (B) that your claim of MASSIVE issues with dairy and mining is just gross exaggeration. However I will watch developments and keep an eye on what is happening...and refrain from making any statements until something actually happens. (As opposed to speculation and guesswork.)
But this old dog has been right about HBL and maybe, just maybe he knows a fair bit about these unsecured capital bonds. When it hits the fan you want to be at the front of the queue eating what's there first not the back accepting any mopped up mess you're offered. The Credit Sails issue promised great unsecured returns too and some of us remember how that ended.

A few months back I called the top on MTFHC's at 76, now 68 and no real depth on the buy side. Does it really make the cat's skim milk go so sour when I'm right again.
What did your mother say about sarcasm BB...

Beagle
15-02-2016, 05:21 PM
I just call it as I see it BB, never been known for my political correctness and probably never will be. A question you might want to ask yourself after reviewing the SP graph's of the major Australian banks, is why has the ANZ been smacked down a lot harder than the rest of them ? Percy reckons they have the biggest exposure to the Dairy industry and from what I've read elsewhere this seems to be right, (sorry haven't got time to post supportive links but surely you can do some background reading ?) I have seen first hand the carnage these sort of unsecured deeply subordinated instruments have inflicted upon investors first hand during the GFC, that's why I find the terms of them so abhorrent. The other thing is that in a recent article on interest.co.nz the comment was made that about 90% of investors don't understand the implications of the Reserve Bank's open bank resolution and its implications for investors in banks. Sorry but I felt it was worth some more airing on here to help others understand the risks...I am sure not everyone is such a well informed investor as you or I. The risk of loss is small as is the chance of the ANZ invoking any of their "escape clauses" so eloquently written into the fine print of this instrument but in the context of what is starting to look like a pretty serious correction in international banking stocks I thought this was worth some more bandwidth.

I am sure many will be very happy to receive their 7.2% coupon. The odds are they will continue to receive same and all will be well. As Winner suggested earlier, if the ANZ have to invoke some of their clauses or RBNZ invoke the provisions of the open banking resolution there will be so many other problems going on nobody will even notice $500m being compromised so I shall crawl back into my kennel and wonder why I bothered barking in the first place.

macduffy
15-02-2016, 07:48 PM
A question you might want to ask yourself after reviewing the SP graph's of the major Australian banks, is why has the ANZ been smacked down a lot harder than the rest of them ?

The reason seems to be ANZ's higher exposure to Asian markets - now seemingly downplayed since the retirement of CEO Mike Smith and China's slowdown. New management have specifically revoked the previously ambitious target for Asian earnings. Dairy exposure, while significant to the NZ business is much less so in the ANZ Group lending portfolio.

Beagle
18-02-2016, 04:16 PM
Interesting article

Things may have changed?

Mind you punters still like them - the 7.2% ANZ jobs are yielding 4% odd if you buy them today
http://www.interest.co.nz/personal-finance/79953/we-dont-have-securities-named-cocos-nz-we-do-have-bank-securities-issue-same

Hang on a minute mate. My gut instinct tells me something is not quite right here. Can't be 4%, (I was assuming you were right hence my initial very strong surprise).
7.2% coupon rate and currently trading at about $1.026 per $1. Ticker code ANBHB on NZDX.
So one is paying a 2.6% premium for the remaining life of these instruments.
My understanding is that these have callable features built into them so the bank can call them at the first five year anniversary and any five year anniversary thereafter and that the yield calculation is usually based on the assumption that the bank call them at their first option, (although this is probably unlikely in the current environment IMO).

These were first listed on 1 April 2015 so there's just over 4 years to run to the first possible redemption date by the ANZ bank. In simple terms without getting into a full bond calculator analysis you're paying a 2.6% premium for the next four years coupon's of 7.2% so the yield to first possible maturity is approx. (7.2 x 4) - 2.6 = 26.2 / 4 = 6.55%.

This corrected approximate yield makes more sense and gives something of an idea where HBL will need to pitch their Tier 2 capital raise in terms of yield.

I still don't like them for all the reasons mentioned earlier in the thread but I can understand in an ultra low interest rate environment, lowest in more than 50 years, which is likely headed even lower how these would have some appeal, (as a modest part of a well diversified portfolio of other investments) to bond investors chasing yield.

winner69
18-02-2016, 04:26 PM
Hang on a minute mate. My gut instinct tells me something is not quite right here. Can't be 4%, (I was assuming you were right hence my initial strong surprise).
7.2% coupon rate and currently trading at about $1.025 per $1.
So one is paying a 2.5% premium for the remaining life of these instruments.
My understanding is that these have callable features built into them so the bank can call them at the first five year anniversary and any five year anniversary thereafter and that the yield calculation is usually based on the assumption that the bank call them at their first option, (although this is probably unlikely in the current environment IMO).

I will get my old bond calculator out and edit this to calculate the true yield assuming the bank exercise their first right of redemption.

They were 1.062 last week

https://www.nzx.com/markets/NZDX/hybrids/ANBHB?icharts=true

Look at the chart - price fallen down a cliff face. ha ha

Sideshow Bob
18-02-2016, 08:02 PM
They were 1.062 last week

https://www.nzx.com/markets/NZDX/hybrids/ANBHB?icharts=true

Look at the chart - price fallen down a cliff face. ha ha

Record date for quarterly dividend was on Monday.

winner69
18-02-2016, 08:24 PM
Record date for quarterly dividend was on Monday.

Thanks Bob

Snoopy
23-02-2016, 05:52 PM
A question you might want to ask yourself after reviewing the SP graph's of the major Australian banks, is why has the ANZ been smacked down a lot harder than the rest of them ? Percy reckons they have the biggest exposure to the Dairy industry and from what I've read elsewhere this seems to be right, (sorry haven't got time to post supportive links but surely you can do some background reading ?)


The reason seems to be ANZ's higher exposure to Asian markets - now seemingly downplayed since the retirement of CEO Mike Smith and China's slowdown. New management have specifically revoked the previously ambitious target for Asian earnings. Dairy exposure, while significant to the NZ business is much less so in the ANZ Group lending portfolio.

Having skin in the game (being an ANZ shareholder) gives a strong incentive to check out the facts. So I have done just that.



Loan CategoryANZ Loan Book FY2015 (gross)ANZ Loan Book FY2015 (%ge)ANZ 'Overseas' Loan Book FY2015 (gross)ANZ 'Overseas' Loan Book FY2015 (%ge)


Agriculture, Forestry, Fishing and Mining$39,610m4.7%$5,965m3.2%


Business and Property Services$51,000m6.1%$6,969m3.8%


Construction$7,609m0.9%$767m0.4%


Entertainment, Leisure and Tourism$11,797m1.4%$1,438m0.8%


Finance and insurance$230,710m27.5%$98,337m53.2%


Government and Local Authority$52,5246.2%$8.854m4.8%


Manufacturing$34,432m4.1%$20,332m11.0%


Personal lending$330,925m39.5%$13,246m7.2%


Electricity, Gas and Water Supplies$9,795m1.2%$3,774m2.0%


Retail & Wholesale trade$38,528m4.6%$15,460m8.4%


Transport and storage$14,783m1.8%$4,984m2.7%


Other$16,455m2.0%$4,476m2.4%


Total$838,248m100%$184,602m100%



The ANZ loan exposure to Asian markets is therefore:

$184,602m/$838,248m = 22.0%

By way of comparison the equivalent figure for Westpac, who do not have a specific push into Asia is just 3%. So the facts back up your suggestion Macduffy.

Now moving onto Rogers point, ANZ as an Australian entity does not disclose a separate exposure for Agriculture. Agriculture loans are lumped in with Forestry Fishing and Mining. The above figure in the table is 4.7%. As a reference the equivalent figure for Westpac (who claim to be underweight mining) is only 2.9%. So ANZ has nearly twice the exposure to Agriculture, Forestry Fishing and Mining as Westpac does. This means that Roger is probably correct as well.

In this instance, with both Macduffy and Roger likely being correct in their views, any mark down in the value of ANZ is probably a result of pressure from both angles.

SNOOPY

tim23
02-04-2016, 03:58 PM
Thinking of switching from these to the ordinary shares - anyone else done this or considering?

kiwitrev
30-06-2016, 08:50 AM
Great opportunity to load up on this bond if you believe no big sell off in global markets. Current sellers showing a bit of desperation below 102 for a bond yielding 7.2% in an ever decreasing interest rate environment.

BIRMANBOY
30-06-2016, 10:31 AM
You should ask Roger KT..maybe he will ditch his AIR and load up on these..LOL
Great opportunity to load up on this bond if you believe no big sell off in global markets. Current sellers showing a bit of desperation below 102 for a bond yielding 7.2% in an ever decreasing interest rate environment.

kiwitrev
21-02-2017, 12:31 PM
Great opportunity to load up on this bond if you believe no big sell off in global markets. Current sellers showing a bit of desperation below 102 for a bond yielding 7.2% in an ever decreasing interest rate environment.

Odd behaviour with this bond. November record date trades at par, February $105.00 per $100 and post record date (today) $103.85. What occurred during November to cause sharp drop and why is the current differential so narrow compared with long term history?

kiwitrev
22-02-2018, 11:51 AM
No posts this bond for a year-but-thought should note ANZ calling ANBHA $835m 18 April 2018. So ANBHB Optional Exchange Date is May 2020 which allows for the bond to be repaid or converted to ordinary shares. What do posters think? Will ANZ follow the example of the ANBHA bond. Of course the behaviour of interest rates can affect the outcome.

BIRMANBOY
12-03-2020, 03:09 PM
Anyone still following /holding/looking at these? If Optional exc date is may 20 exchange for shares I guess wouldn't be bad? Current SP is 19.58 (3years ago was 35 ..) cash out ok I suppose is ok. Thoughts?

mcdongle
13-03-2020, 09:16 AM
They may offer a lower rate at the reset...but with whats going on who knows

Snoopy
13-03-2020, 09:41 PM
Anyone still following /holding/looking at these? If Optional exc date is may 20 exchange for shares I guess wouldn't be bad? Current SP is 19.58 (3years ago was 35 ..) cash out ok I suppose is ok. Thoughts?


Would you recover the brokerage buying fee with such a small time to maturity? ANBHB seems to be trading at very near to par. Existing Shareholders wouldn't like it if these bonds converted to shares. Good for ANBHB holders to get some ANZ shares at a discounted price, if such a conversion occurs. Bondholders would get ANZ shares at a very good price, but other shareholders would probably have a similar buying opportunity as the market price sank towards the bond conversion price. Have ANZ articulated the need to raise more capital outside of their commitment to retain more earnings?

SNOOPY

Grimy
14-03-2020, 12:48 PM
At present I'd be happy either way-repayment of capital or conversion to shares.

BIRMANBOY
14-03-2020, 01:47 PM
Not looking to buy..already holding since inception. Just pondering what, if anything might be on the cards coming up. I think the reason they are trading at par is the uncertainty. Until 2018 they were trading well but since then has been gradual decline...perhaps because holders didn't want to get caught having to take pricey ANZ shares ( $35 ) but now SP is at $19 odd so I wouldn't mind shares. Difficult to find information on these and Kiwi trev several posts prior says optional exchange date is May 2020. I'm sure info on options is somewhere but I cannot find it?

Would you recover the brokerage buying fee with such a small time to maturity? ANBHB seems to be trading at very near to par. Existing Shareholders wouldn't like it if these bonds converted to shares. Good for ANBHB holders to get some ANZ shares at a discounted price, if such a conversion occurs. Bondholders would get ANZ shares at a very good price, but other shareholders would probably have a similar buying opportunity as the market price sank towards the bond conversion price. Have ANZ articulated the need to raise more capital outside of their commitment to retain more earnings?

SNOOPY

Grimy
14-03-2020, 02:42 PM
Here's a link to the original offer document
https://www.anz.co.nz/content/dam/anzconz/documents/about-us/wcmmigration/ANZ-Capital-notes-investment-statement.pdf?MOD=AJPERES
25/5/2020 is the optional exchange date, 25/5/2022 is the mandatory conversion date (with conditions).

Grimy
14-03-2020, 02:53 PM
They can repay, or convert on the 25/5/2020. If they don't we change to a floating interest rate, set each quarter until the 25/5/2022, when they look at conversion to shares again. If certain conditions are not met on the 25/5/2022 they then carry on, with the possibility of conversion at any quarterly interest payment period if conditions are met-if not they could end up being possibly perpetually.
I think I've got that roughly right.
Will be interesting to see what happens in May.

BIRMANBOY
14-03-2020, 03:58 PM
Thanks for that :)
Here's a link to the original offer document
https://www.anz.co.nz/content/dam/anzconz/documents/about-us/wcmmigration/ANZ-Capital-notes-investment-statement.pdf?MOD=AJPERES
25/5/2020 is the optional exchange date, 25/5/2022 is the mandatory conversion date (with conditions).

BIRMANBOY
14-03-2020, 04:09 PM
Yes not sure of the benefit (to me) of changing to a new probably much, much lower interest rate but I suppose it would be at least 3%? if the ANZ shares are still low, or lower even would be ok. My guess is we will get what is best for the ANZ so wont be repayment, but could be shares or new interest rate. Selling now may be easier...think I can do better with the funds elsewhere. Thanks.
They can repay, or convert on the 25/5/2020. If they don't we change to a floating interest rate, set each quarter until the 25/5/2022, when they look at conversion to shares again. If certain conditions are not met on the 25/5/2022 they then carry on, with the possibility of conversion at any quarterly interest payment period if conditions are met-if not they could end up being possibly perpetually.
I think I've got that roughly right.
Will be interesting to see what happens in May.

Grimy
14-03-2020, 04:45 PM
I'd be happy with shares, but at present with them sometimes moving a couple of dollars a day (although mostly down) I'd like to have some say over the timing. Cash out is also fine, but selling at about par now might be the sensible option as you say, even with missing the next (final?) interest payment.
I've got some thinking to do.
But have certainly been happy with them for their quarterly payments the past 5 years.

BIRMANBOY
14-03-2020, 04:55 PM
Yes they have been worthwhile for sure. :)
I'd be happy with shares, but at present with them sometimes moving a couple of dollars a day (although mostly down) I'd like to have some say over the timing. Cash out is also fine, but selling at about par now might be the sensible option as you say, even with missing the next (final?) interest payment.
I've got some thinking to do.
But have certainly been happy with them for their quarterly payments the past 5 years.

Grimy
14-03-2020, 05:04 PM
Just checked how they set the interest rate if they carried on with them and we got the floating rate.
It will be the 3 month bank bill rate + a margin.
The margin (which they say will not change for the term of the offer) is 3.50%.
Say the 3 month BBR is 0.75% (who knows what it will be in May), that's 4.25%, which isn't terrible in the current climate. That may be enough to convince ANZ to repay them. Surely they can get money cheaper than that.
Plus of course they won't want to be seen as not doing what was implied they would at the beginning (I'm sure their intention was to pay out this year).

BIRMANBOY
14-03-2020, 07:21 PM
What you say makes perfect sense....I guess the question we should ask ourselves is, are we happy with that or are there other sweeter, better opportunities. At the moment there is a swag of good (and relatively safe and conservative prospects in shares, so for me the desirability of bonds of any type are not particularly compelling.
Just checked how they set the interest rate if they carried on with them and we got the floating rate.
It will be the 3 month bank bill rate + a margin.
The margin (which they say will not change for the term of the offer) is 3.50%.
Say the 3 month BBR is 0.75% (who knows what it will be in May), that's 4.25%, which isn't terrible in the current climate. That may be enough to convince ANZ to repay them. Surely they can get money cheaper than that.
Plus of course they won't want to be seen as not doing what was implied they would at the beginning (I'm sure their intention was to pay out this year).

Snoopy
15-03-2020, 07:44 AM
Not looking to buy..already holding since inception. Just pondering what, if anything might be on the cards coming up. I think the reason they are trading at par is the uncertainty. Until 2018 they were trading well but since then has been gradual decline...


Birmanboy, with the probable repayment date of the ANBHB bond coming up so soon, in just a couple of months, you wouldn't expect anything else but the market price of ANBHB returning to par. If you are probably going to be given $1 for each bond in a couple of months, why would anyone pay more than a dollar now? One reason might be to pick up the last interest payment, but that would have to be offset against the transaction cost of buying the bond. So the reason for the decline in the bond price is certainty about what is about to happen, not uncertainty!

If the bond continues then the interest rate is reset to 'market rates'. So there is no reason to pay a premium today for any possible renewal rights. Nothing to see here. Everything behaving exactly as you would expect.

SNOOPY

BIRMANBOY
15-03-2020, 09:08 AM
Agree mostly but the uncertainty arises as to if they renew and the rate becomes 4.25%...there may well be some people who like that as an option as opposed to a TD for example. Each scenario has slightly different dynamics that will appeal or not appeal to viewers depending on viewpoints...therein lies the uncertainty. ANZ is the one that sets the playing field and depending on what they choose, and what degree of takeup there is ..could go up or could go down.
Birmanboy, with the probable repayment date of the ANBHB bond coming up so soon, in just a couple of months, you wouldn't expect anything else but the market price of ANBHB returning to par. If you are probably going to be given $1 for each bond in a couple of months, why would anyone pay more than a dollar now? One reason might be to pick up the last interest payment, but that would have to be offset against the transaction cost of buying the bond. So the reason for the decline in the bond price is certainty about what is about to happen, not uncertainty!

If the bond continues then the interest rate is reset to 'market rates'. So there is no reason to pay a premium today for any possible renewal rights. Nothing to see here. Everything behaving exactly as you would expect.

SNOOPY

Grimy
16-03-2020, 10:58 AM
That you selling this morning BB?

BIRMANBOY
16-03-2020, 03:45 PM
Hah no not me...i'm still pondering:p
That you selling this morning BB?

Grimy
16-03-2020, 04:43 PM
Me too.....

BIRMANBOY
02-04-2020, 01:21 PM
Update on these...they wont be redeeming these as per request of RB but will continue paying interest.


Accordingly, ANB will not be permitted to redeem the NZ$500 million of


mandatory convertible perpetual subordinated securities (Capital Notes) under


ticker code ANBHB on the Optional Exchange Date (25 May 2020).





The RBNZ's decision does not affect ANB's ability to pay interest on the


Capital Notes. Interest is scheduled to be paid quarterly in arrears, is


subject to ANB's discretion and other conditions as set out in the investment


statement, and is non-cumulative.





The terms of the Capital Notes also provide for their conversion into


ordinary shares of Australia and New Zealand Banking Group Limited (listed on


the NZX and ASX) in May 2020 or May 2022 (conversion is subject to certain


conditions as set out in the investment statement of the Capital Notes).





ANB's capital position remains strong, with total capital of $13.4 billion,


or 13.6% of risk weighted assets at 31 December 20191. ANB's total capital


increased by approximately $1.6 billion between 1 October 2018 and 31


December 20191.





ANB acknowledges the steps the RBNZ is taking to promote market liquidity and


stability, the flow of funding to the economy and this measure to maintain


the banking system's capital position during the COVID-19 pandemic.

Grimy
02-04-2020, 07:06 PM
The interest rate (if not converted to shares-which I don't know if the RB would allow either) will be around 4%.
I can live with that as long as they keep paying, and the situation is to be monitored and revisited by the RB.
My Kiwibank KCFHA are similarly affected, their rate will be about 4.25%.

BIRMANBOY
02-04-2020, 08:17 PM
Yes better than a term deposit so as you say I'm ok with that as well. My guess is that eventually they will just exchange them out for shares but who knows.
The interest rate (if not converted to shares-which I don't know if the RB would allow either) will be around 4%.
I can live with that as long as they keep paying, and the situation is to be monitored and revisited by the RB.
My Kiwibank KCFHA are similarly affected, their rate will be about 4.25%.

Fred114
08-04-2020, 12:43 PM
The interest rate (if not converted to shares-which I don't know if the RB would allow either) will be around 4%.
I can live with that as long as they keep paying, and the situation is to be monitored and revisited by the RB.
My Kiwibank KCFHA are similarly affected, their rate will be about 4.25%.

KCFHA has another chance to repay funds in two years, 2022. That would be a better outcome. How would a conversion to shares work for KCFHA if they don't repay?

macduffy
08-04-2020, 01:47 PM
KCFHA has another chance to repay funds in two years, 2022. That would be a better outcome. How would a conversion to shares work for KCFHA if they don't repay?

An interesting question. Is there a formula specified in the original offer document? Otherwise, I presume that they would get an accounting firm to dream up a value and conversion formula.
Alternatively, repayment would avoid a lot of problems!

Grimy
09-04-2020, 10:08 AM
I haven't looked through the complete document, but if converted to shares, these shares in Kiwi Bank will be held by KCFL, and we would be paid dividends if/as KCFL are paid dividends by KB. KCFHA holders would not become Kiwi Bank shareholders.
That's how I read it (but haven't spent much time on it).

macduffy
09-04-2020, 01:11 PM
That's interesting, Grimy, but I wonder how the conversion would work, given that there isn't any market or market price for Kiwibank shares. Perhaps $1 of KCFHA notes becomes $1 of Kiwibank capital?

Incidentally, we seem to have strayed from ANBHB here!

Grimy
10-04-2020, 11:52 AM
Here we go;
CONVERSION: If Kiwibank is required to convert some or all of the Kiwibank Perpetual Bonds held by KCFL into Ordinary Shares, the number of Ordinary Shares to be issued to KCFL will be determined by dividing (i) the total of the principal amount of the Kiwibank perpetual Bonds being converted by (ii) the value per share of the existing Ordinary Shares. The value per share of the existing Ordinary Shares will be determined by dividing (i) the value of Kiwibank's net tangible assets by (ii) the number of existing Ordinaru Shares on issue. Unless Kiwibank appoints an independent expert to determine the market value, Kiwibank will determine the value of its net tangible assets by reference to its most recent management accounts and such other information as Kiwibank reasonably considers appropriate.
However, if this would result in the value per share being zero or a negative number, the value of Kiwibank's net tangible assets will be deemed to be $1 million for the purposes of determining the value per share. Kiwibank is not obliged to appoint an independent expert and it may not be practicable to do so in the circumstances to enable conversion to occur when required.

So. I guess that didn't really help! There is more information on how Kiwibank in consultation with the RBNZ determine how many bonds would be converted, but my fingers are getting tired!

Short answer is if the bonds ever have to be converted to shares in Kiwibank (which bond holders will not own), we'll be told the conversion figures at the time.

Now back to ANBHB!

Grimy
26-04-2020, 04:01 PM
Update on ANZ Capital Notes

We are writing to update you on your mandatory convertible perpetual subordinated notes (Capital Notes) issued by ANZ Bank New Zealand Limited (ANZ).

ANZ has been informed by the Reserve Bank of New Zealand (RBNZ) that locally incorporated banks cannot pay dividends on ordinary shares and should not redeem capital notes during the COVID-19 crisis. This decision by the RBNZ was taken to further support the stability of the New Zealand financial system during this period of economic uncertainty.

ANZ’s capital position remains strong, with total capital of $13.4 billion or 13.6% of risk weighted assets at 31 December 2019.

This decision meant that on 2 April 2020 ANZ announced on the NZX that the Capital Notes would not be redeemed on the Optional Exchange Date (25 May 2020). In addition, on 17 April 2020 ANZ announced on the NZX that it was not going to exercise its option to convert the Capital Notes into Australia and New Zealand Banking Group Limited (ANZBGL) shares on the Optional Exchange Date.

The RBNZ’s decision does not affect ANZ’s ability to pay interest on the Capital Notes. Interest is scheduled to be paid quarterly in arrears, is subject to ANZ’s discretion and other conditions as set out in the investment statement, and is non-cumulative.

The interest rate on the Capital Notes will continue to be 7.20% per annum up until the next interest payment date on 25 May 2020. The interest rate on the Capital Notes will then reset on 25 May 2020 and each quarterly interest payment date thereafter to the sum of the three month bank bill rate plus a margin of 3.50% per annum. We will advise the interest rate for each quarter through a NZX announcement.

The three month bank bill rate is a wholesale benchmark interest rate, which is determined by market conditions each business day. As a guide, the three month bank bill rate on 20 April 2020 was 0.3733%, meaning the interest rate on the Capital Notes would have been 3.8733% if the interest rate had been set on 20 April 2020.

As a reminder, the terms of the Capital Notes provide for their mandatory conversion into ordinary shares of ANZBGL on 25 May 2022 (subject to conditions as set out in investment statement). ANZBGL’s shares are listed on the NZX and ASX. Further information on the mandatory conversion will be made available by ANZ to holders of the Capital Notes prior to 25 May 2022.