Genesis capital bond issue

[Joshuatree]

Any opinions on this welcome; my eyes glaze over too fast on the details.
Terms Sheet linked here (http://www.craigsip.com/~/media/Files/Investment%20Banking/%20Genesis-Energy-Capital-Bonds-Terms%20Sheet)

[peat]

The Vector one was ever so slighly better (almost identical terms)
But at 5.7% its good enough for bond investors to be tempted I would suggest. We filled our book and sold the lot.
While it is long dated, it has a reset and resale facility provided by the Issuer every five years. And yet this allows them to consider 50% of the debt as equity. So its a win win in my view. Its pretty unlikely you will be forced to rollover in 5 years (but possible) The Issuer has to pay an extra margin on the whole bond if there are some not resold in five years so they are incentivised to place redemptions with new bond investors .
Vector bond was better though because the extra margin was a whole one percent whereas the Genesis extra margin is only 0.25%
Other than that and GNE paying quarterly interest the two bonds were the same.

[mcdongle]

I heard its heavily oversubscribed?

[peat]

yes indeed McDongle

[Grimy]

I've been allocated 80% of what I applied for, so not too bad. Now waiting to see how much scaling there will be on Vector.

[Joshuatree]

Excellent; many thanks peat:t_up:

[peat]

Vector scaling was brutal.

[Grimy]

Luckily I got 100% of my application.
It was only 10K though..............
Of Vector

[peat]

i've just finished moving my allocation (for clarity, of Genesis)

[permutation]

I am broadening my Horizon away from the current P2P major platform that's providing very few retail loans in the last few weeks.
Have applied for heaps of GNE050 Bonds coming up soon, hope my broker doesn't scale me back too much.
This will compliment my TD's; one advantage being, that they can be cashed in quickly. I am waiting for the property bubble to POP, then search for buying opportunities.

[Joshuatree]

Scaled back to a third of our Genesis app.

[Beagle]

Genesis doing another issue $75m with rights to $50m oversubscriptions. 6 years, minimum interest rate 4.00%, standard brokerage charges apply to any bonds you are allocated, expressions of interest deadline is first thing tomorrow. Whenever I have seen this I have always found it objectionable that companies raising money from the public expect that those subscribing will pay the costs of the brokerage.
Also objectionable that for no valid reason brokerage on fixed interest securities is significantly higher than for equities.
Upshot of this is you are not really getting 4%, the real yield is closer to 3.9% after brokerage costs....or you can get about 8.5% gross yield plus future growth on the shares and pay a modest 0.2% brokerage to do so, which is what I did this morning instead.

[GTM 3442]

After the 1.56% coupon for the Mercury Green Bonds the other year, I think there are a fair few who are seeing 4% as very attractive in the fixed interest space.

However, those Mercury Green Bonds are now crossing at 4%.

I expect a similar situation with the Genesis issue a couple of years down the track. I'd be looking at buying at about 6% (or about 90c in the dollar) for them in second half of 2024.

It's a funny old world. . .

[Beagle]

Yes, there's a lot of issues in recent years where people would be looking at a significant capital loss if they sold now. OCA issued 7 year bonds at 2.30% a while back, now trading at 4.25% and anyone selling now is tearing up 10% of their capital.

I think the final rate set on these was 4.17% but I agree with you that the prospect of some capital loss even at that rate is very real which is another reason I choose the shares which I see as having the real prospect of capital appreciation along with earning more than twice the yield.

[GTM 3442]

Yes, there's a lot of issues in recent years where people would be looking at a significant capital loss if they sold now. OCA issued 7 year bonds at 2.30% a while back, now trading at 4.25% and anyone selling now is tearing up 10% of their capital.

I think the final rate set on these was 4.17% but I agree with you that the prospect of some capital loss even at that rate is very real which is another reason I choose the shares which I see as having the real prospect of capital appreciation along with earning more than twice the yield.

Yes, I see your point.

But in a rising interest rate environment, don't focus only on the potential downside of selling early, think also about the potential benefit of buying late.

[Beagle]

Yes, I see your point.

But in a rising interest rate environment, don't focus only on the potential downside of selling early, think also about the potential benefit of buying late.

Agreed 100%. My point though is always when considering a bond issue, first ask yourself in the underlying equity is a better bet.

[winner69]

If you had bought OCA shares instead of their bonds your capital would be down 23% on the Oct 20 bonds and 32% down on the Sep21 bonds ...collected a few divies in the process

Mind you capital value of these bonds are down as well ...the 2.3% bonds down 9% and the 3.3% ones down 5%

Lost heaps on shares .... lost a little on the bonds

But says any recent investment in Oceania has been bad, really bad - can't win either way ...shares or bonds have been duds .... reflects Oceania management

Maybe the depths of despair is the best to time to buy.

[Joshuatree]

Genesis doing another issue $75m with rights to $50m oversubscriptions. 6 years, minimum interest rate 4.00%, standard brokerage charges apply to any bonds you are allocated, expressions of interest deadline is first thing tomorrow. Whenever I have seen this I have always found it objectionable that companies raising money from the public expect that those subscribing will pay the costs of the brokerage.
Also objectionable that for no valid reason brokerage on fixed interest securities is significantly higher than for equities.
Upshot of this is you are not really getting 4%, the real yield is closer to 3.9% after brokerage costs....or you can get about 8.5% gross yield plus future growth on the shares and pay a modest 0.2% brokerage to do so, which is what I did this morning instead.

Yes me too.

[GTM 3442]

Agreed 100%. My point though is always when considering a bond issue, first ask yourself in the underlying equity is a better bet.

I can see we're coming from somewhat different directions here Beagle.

I'm buying to fit an asset allocation model, and return on capital is only one of the criteria.

There's also the effect on the average credit rating of the bond portfolio, maturity date for laddering, strength of the underlying company, all those sorts of things.

Example OCA - sold out of the shares , looking to buy the bonds - but only at the right price, or Infratil's IFTHA - that annual reset really makes a difference over the long haul on the right entry price.

[Beagle]

I totally understand where you are coming from. Contrary to some of the talk (strangely on the OCA thread), about being all in on equities as "THE" only way to go in terms of maximizing long term returns I think there are times that having some bonds or short term deposits are a good strategy but as you quite rightly point out timing is very important.

[Beagle]

https://www.directbroking.co.nz/DirectTrade/dynamic/announcement.aspx?id=6018053

Terms of the new Mercury Bond issue 5.73%, not too bad for a bond. I put my hand up for a few and hope I get them.

[Grimy]

GNE040 Bond may be repaid/rolled over next month (9/6/22). Be interesting to see what new offer they come up with if it is.

[mcdongle]

GNE040 Bond may be repaid/rolled over next month (9/6/22). Be interesting to see what new offer they come up with if it is.

I am hoping for something around the same rate

[Grimy]

Chris Lee guessing around 5.5%.
GNE040 was 5.7%

[Beagle]

If its around 5.5% I'll probably put my hand up for a few.

[Grimy]

Yeah, I'll probably roll mine over to the new one.

[Grimy]

It appears there is no option to roll over the current bond due to timing.
I think Genesis will have annoyed a few current investors by doing this (me included).
Will just have to hope for some bargains to be around after the 9th June to spend my money on.

[Beagle]

Terms are out for the new Green bond issue for Genesis. Minimum rate 5.35%. They are unsecured and rank behind more than $2 Billion in more secured debt. Looking at the overall structure of the balance sheet I prefer the extra 3% gross yield on the shares and will put my hand up for more of those instead.

P.S. Might get a few of these bonds too.