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peat
15-08-2010, 04:26 PM
Greenstone Energy Finance Limited is issuing fixed rate senior secured bonds. The bonds offer a coupon of 7.35% and mature on 15 October 2016.


Application has been made to New Zealand Exchange Limited (NZX) for permission to list the Greenstone Energy Bonds ... ...and all of the requirements of NZX relating thereto that can be complied with on or before the date of this notice had been duly complied with. However, the Bonds have not yet been approved for trading...

POSSUM THE CAT
15-08-2010, 04:42 PM
Peat They are cheapskates considering ANZ is offering 6-75% for a $5000.00 5 year term deposit with interest paid monthly & 12 months govt guarantee

winner69
15-08-2010, 07:09 PM
One comment made in the paper the other day said that any time after sometime in 2013 they have the option to buy them back ... the concern was that if interest rates fell and were lower at that time they probably would and refinance at lower rates .... leaving the punter to reinvest in a low interest rate envionment after locking away rtaes for a 5 year period.

The article also pointed out that these were not rated but the promotoers are saying they have done the sums and if they were they would be rated quite high ... but then declined to share their workings so the whole argument about transparency came up.

No dount punters will be swayed with the comfort of names like Shell and NZ Super Fund behind them

RRR
15-08-2010, 08:00 PM
In my books, bonds are for the institutions/managed funds. If an individual is investing in bonds, he must be very wealthy and want to diversify risk. It will suit for a large diversified portfolio. We need more and more corporate bonds issuance from stable and profitable institutions and that will lessen the reliance on the big banks and will diversify their debt profile and spread the risk.

peat
15-08-2010, 08:05 PM
I've read the investment statement (not the prospectus itself) main points I note are :

they are callable after April 2013 (2.5 years away) for the Principal or the NZDX price (whichever is greater)

Infratil and New Zealand Superannuation Fund will not guarantee the Bonds and are not Guarantors.

NZX ticker code GEF

Possum The Cat
The Effective Annual rate is still higher for these though clearly ANZ (and Rabo also at 6.85) would be of higher security which is I suppose the point you're making.


Does anyone have any idea about how the secondary market will go with these? Thats an important distinction between these and term deposits , you may be able to sell them.

peat
15-08-2010, 08:09 PM
One comment made in the paper the other day said that any time after sometime in 2013 they have the option to buy them back ... the concern was that if interest rates fell and were lower at that time they probably would and refinance at lower rates .... leaving the punter to reinvest in a low interest rate envionment after locking away rtaes for a 5 year period.

yes callable bonds are valued differently
but note the terms - price is based around mkt value

POSSUM THE CAT
16-08-2010, 08:42 AM
Peat I want more margin than that for the longer term and that they have the right to duck out early. Also the higher risk. would have to be 8.5% to interest me.

Beagle
16-08-2010, 09:36 AM
I've read the investment statement (not the prospectus itself) main points I note are :

they are callable after April 2013 (2.5 years away) for the Principal or the NZDX price (whichever is greater)

Infratil and New Zealand Superannuation Fund will not guarantee the Bonds and are not Guarantors.

NZX ticker code “GEF

Possum The Cat
The Effective Annual rate is still higher for these though clearly ANZ (and Rabo also at 6.85) would be of higher security which is I suppose the point you're making.


Does anyone have any idea about how the secondary market will go with these? Thats an important distinction between these and term deposits , you may be able to sell them.

Peat I think the current yield on Goodman property Trust senior bonds is a reasonable proxy for how these will trade, currently about 6.75%.
IMO there's quite a bit of cash sitting on the sidelines at present so these bonds will have appeal due to ongoing uncertainty due to the GFC.

The other point made regarding Rabobank and other banks term deposits for five years is valid but note, there are signifcant penalties for pulling out of 5 year term deposits with the banks whereas as we all know bonds with a large issuance are readily trade-able.

I think they have been fairly miserly with the rate too, but hey, if I were them I'd do the same in this low interest rate environment.

Investors looking for a better rate and an equity upsaide kicker might want to have a very good look at Kiwi Income Property Convertible Notes KIPGC. Even at $1.07 that's a better rate than this security, has vastly lower gearing on 24% and if KIP shares are trading at or above $1.20 in December 2014 you're in the money.
If they're trading at lower than this, the ordinary shares are issued on conversion at a 2% discount to 20 day VWAP.

Dubdee
19-08-2010, 09:49 AM
Tim Brown has just blown both feet off this issue. BB shadow rated but priced as Investment grade and maketed to brokers accordingly. And tim was too mean to pay firm brokerage so watch the salesmen head for the hills

macduffy
19-08-2010, 10:08 AM
And tim was too mean to pay firm brokerage so watch the salesmen head for the hills

I don't understand this.

Are you saying that brokers (salesmen) won't receive any commission for acting in this issue?

CJ
19-08-2010, 10:30 AM
And tim was too mean to pay firm brokerage so watch the salesmen head for the hillsaccording to this, they already have (non binding) take up of 75%.

Maybe they are just being smart. They know it will be fully subscribed so why waste money.

My prediction is it will close oversubscribed

Dubdee
19-08-2010, 10:45 AM
The issue was unrated but great marketing play was made on the road shows that it was right up there with the top corporate credits IE Investment grade. It was priced accordingly. Now Tim is under some pressure has said its Not investment grade which buggers the pricing. And since the 75% interest is non binding its now a much harder sell at the original yield as its Just JUNK

Silverlight
19-08-2010, 11:48 AM
Have retail investors learnt nothing?

...by Tuesday the lead managers had received non-binding offers for $150m worth of bonds.


Mr Brown... concluded that Standard & Poor's probably would have given the bonds a BB rating – ...often referred to as junk

Clearly not... unrated Junk, pile in for your 7.5% return...

http://www.stuff.co.nz/business/industries/4038285/Infratil-Investors-to-judge-issue

CJ
19-08-2010, 12:28 PM
Given that it is half owned by the Superfund which is owned by the Govt, does it not have the same 'effective' Govt guarantee that Kiwibank has?

We will see if it is oversubscribed.

macduffy
19-08-2010, 12:41 PM
The issue was unrated but great marketing play was made on the road shows that it was right up there with the top corporate credits IE Investment grade. It was priced accordingly. Now Tim is under some pressure has said its Not investment grade which buggers the pricing. And since the 75% interest is non binding its now a much harder sell at the original yield as its Just JUNK

Still doesn't answer my question on the "too mean to pay brokerage" statement.

I've concluded now that you meant "too mean to pay a fee to the rating agencies"?

Dubdee
19-08-2010, 01:14 PM
Macduffy,
No what I meant is that brokers are paid by issuers to take stock firm; in effect an underwrite. Greenstone wouldnt pay just expecting the stock to walk out the door. Now brokers are just on best endeavours, not committed. Some will certainly walk unless clients beat the doors down

peat
19-08-2010, 01:53 PM
Selected cut and pastes from the article.



Infratil is defending its decision not to seek a credit rating for a major retail bond issue by petrol retailer Greenstone, arguing that the research of the financial institutions pushing the bonds means more than that of a ratings agency.

http://www.stuff.co.nz/business/industries/4038285/Infratil-Investors-to-judge-issue

The bonds will carry no credit rating, although investors will rank equally with Greenstone's banks if the company fails.


"Why did the global financial crisis happen? Because guys bought bonds purely on the basis of ratings."

banks such as Westpac which were recommending the bonds to clients but not directly involved in the issue had "actually put their money up" lending $100m for the purchase of the Shell assets.


discussions between First NZ and Infratil ahead of the bond issue concluded that Standard & Poor's probably would have given the bonds a BB rating which is sub-investment grade and often referred to as junk because of Greenstone's newness. Such a rating would reflect Standard & Poor's formulas

He denied Infratil had decided not to seek a rating because it didn't want the answer it expected to get. "It's not so much that, as the value we were going to extract for the cost of north of $100,000 a year to get the rating done."

macduffy
19-08-2010, 04:21 PM
Macduffy,
No what I meant is that brokers are paid by issuers to take stock firm; in effect an underwrite. Greenstone wouldnt pay just expecting the stock to walk out the door. Now brokers are just on best endeavours, not committed. Some will certainly walk unless clients beat the doors down

Thanks, Dubdee.
It will be interesting to see what rate of brokerage/commission the issue pays brokers for applications carrying their stamp - once the prospectus comes out.

CJ
20-09-2010, 02:52 PM
My prediction is it will close oversubscribedGuessed correct but only $47m, not the full over subscription of $100m

JayPe
21-09-2010, 01:08 PM
discussions between First NZ and Infratil ahead of the bond issue concluded that Standard & Poor's probably would have given the bonds a BB rating – which is sub-investment grade and often referred to as junk – because of Greenstone's newness. Such a rating would reflect Standard & Poor's formulas

He denied Infratil had decided not to seek a rating because it didn't want the answer it expected to get. "It's not so much that, as the value we were going to extract for the cost of north of $100,000 a year to get the rating done."

That sounds quite bizarre. Would it rate so low purely because of the newness of the holding company despite the fact that the assets have been around for ages? If so, that's a shocking indictment on S&P. Surely their model is more sophisticated than that?

peat
21-09-2010, 01:22 PM
If so, that's a shocking indictment on S&P
No shortage of these :p

CJ
21-09-2010, 01:56 PM
If so, that's a shocking indictment on S&P.


No shortage of these :p
Didn't I see yesterday that S&P admitted they didn't downgrade SCF as fast as they should of because they trusted statements made by God (aka. Alan Hubbard)?