CNU010 Being Repaid this Week

[Grimy]

Thursday (6/5/21) sees $400 million being repaid.
With bonds/fixed interest returns being so low, I guess a lot of this money will find its way into the share market.
Are we going to see some price rises due to this, or have people been buying already, waiting for the Chorus repayment to then top up their emergency/floating cash reserves?

[Grimy]

And Wellington Airport repay some of their bonds on the 15th of this month too.

[Snoopy]

Thursday (6/5/21) sees $400 million being repaid.
With bonds/fixed interest returns being so low, I guess a lot of this money will find its way into the share market.
Are we going to see some price rises due to this, or have people been buying already, waiting for the Chorus repayment to then top up their emergency/floating cash reserves?


In December 2020 Chorus issued two new bonds:

1/ CNU030 7 year bonds: $200m with a coupon rate of 1.98%
2/ CNU040 10 year bonds: $200m with a coupon rate of 2.51%

At the time it was made known that these two bonds would replace the $400m of CNU010 4.12% bonds, due to mature on Thursday 6th May. So I think it is a fair bet that institutional investors would have known well in advance of the situation and reinvested accordingly.

It is interesting to see that CNU030 last traded at an interest rate of 2.1% and CNU040 last traded at an interest rate 2.6%. This means foundation bondholders will be suffering a modest capital loss.

SNOOPY

[RTM]

In December 2020 Chorus issued two new bonds:

1/ CNU030 7 year bonds: $200m with a coupon rate of 1.98%
2/ CNU040 10 year bonds: $200m with a coupon rate of 2.51%

At the time it was made known that these two bonds would replace the $400m of CNU010 4.12% bonds, due to mature on Thursday 6th May. So I think it is a fair bet that institutional investors would have known well in advance of the situation and reinvested accordingly.

It is interesting to see that CNU030 last traded at an interest rate of 2.1% and CNU040 last traded at an interest rate 2.6%. This means foundation bondholders will be suffering a modest capital loss.

SNOOPY

"This means foundation bondholders will be suffering a modest capital loss".....if they chose to sell...right ?
I hold a few bonds including the above mentioned Chorus one; the interest rates have been great so I have held until they have been paid back. Very sad about that !

[Snoopy]

"This means foundation bondholders will be suffering a modest capital loss".....if they chose to sell...right ?
I hold a few bonds including the above mentioned Chorus one; the interest rates have been great so I have held until they have been paid back. Very sad about that !

It depends how you look at things. If as a foundation bond holder, you hold your CNU030 and CNU040 bonds until they mature, then -yes- you will get all your capital back. However your 'penalty' for doing this is that you will be earning less interest than you otherwise would, buying an equivalent term and rated bond on the market today. So you have a Hobson's choice with your CNU030 and CNU040 bonds..

1/ Sell at a loss and reinvest your money in equivalent bonds at market interest rates.
2/ Do not sell and suffer a below market interest rate return for the life of the bonds.

Generally the market prices things so that whether you choose 1/ or 2/, you will still end up with the same cash in hand by the time these bonds, or equivalent bonds mature.

SNOOPY

[Grimy]

Wellington Airport (WIA020) repayment through today. Going to miss that 6.25% rate.
I see Precinct have opened a 2.85% (minimum-but they usually settle on the announced minimum rate) 6 year senior bond today. Not enough to interest me.

[Grimy]

Precinct closed over subscribed by 50% - $150,000,000 total. Interest rate-surprise, surprise-2.85%
Still plenty of appetite for bonds.

[mcdongle]

So where has everybody put their Chorus money? Mine is still sat in the bank so far.

[Grimy]

Topped up on a few Argosy (before the results were announced). Remainder is sitting in the Jarden account - waiting........

[mcdongle]

Yes difficult to find value nowadays.......

[Grimy]

Spent a little of it today on KPG and OCA.