VCT080.NZ - VCT 15/06/22 5.70% Vector Limited Bonds

VCT080.NZ - VCT 15/06/22 5.70% Vector Limited Bonds

These are capital bonds and so... they don't actually have to pay you back for 'kin ages. maybe never, not sure.
But! there is some liquidity on market and the reset every 5 years and they will consider buying them off you or selling them on your behalf at that time.
So if you are a true bond investor they could be useful.
Better yield than some other bonds and a pretty highly stable company.

But recently the've got cheaper (better yield) and I'm wondering if that's a part of the corona era or what?
Attachment 11136

I think a lot of people want out of everything at the moment

I'm happy to hold onto mine

There's the same spike in yield across a whole lot of the NZDX. PFI, IFT, CNU SUM included. I think we're seeing the dreaded "flight to quality" - after all, there's a corresponding dip on GOV390 and GOV410. . .

thanks GTM
yes I can see it also in SUM010 except its even worse and they are now available around par.


Attachment 11163

So the money thinks Vector is safer than SUM which is reasonable, but shows how SUM is now considered to have some chance of failure I guess.
I wouldn't have thought so myself but stranger things have happened.

does anybody know if the reset happening next year will use the same margin ?

The maturity date is listed as July next year, so I'm expecting repayment then, but if they were rolled over I would expect the same interest rate calculations as below to apply, which are quite good as far as I'm concerned.
I admit I haven't read through the offer document since applying for them initially.

The Adjusted Interest Rate is the aggregate of:
(a) the Swap Rate at or about 3.00pm on 14 June 2017; plus
(b) the Issue Margin for the prior Bond Period (being an Issue
Margin of 2.95 per cent per annum); plus
(c) the Specified Margin (being 1.00 per cent per annum).
As at 9.00am on 28 April 2017, the Swap Rate was 2.90 per
cent. By way of illustrative example only, if the Adjusted Interest
Rate was being determined at that time, the calculation set out
above would give an Adjusted Interest Rate of 6.85 per cent per
annum. The Swap Rate will fluctuate between the date of these
explanatory notes and 14 June 2017.

Quote:

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Originally Posted by Grimy

The maturity date is listed as July next year, so I'm expecting repayment then, but if they were rolled over I would expect the same interest rate calculations as below to apply, which are quite good as far as I'm concerned.
I admit I haven't read through the offer document since applying for them initially.

The Adjusted Interest Rate is the aggregate of:
(a) the Swap Rate at or about 3.00pm on 14 June 2017; plus
(b) the Issue Margin for the prior Bond Period (being an Issue
Margin of 2.95 per cent per annum); plus
(c) the Specified Margin (being 1.00 per cent per annum).
As at 9.00am on 28 April 2017, the Swap Rate was 2.90 per
cent. By way of illustrative example only, if the Adjusted Interest
Rate was being determined at that time, the calculation set out
above would give an Adjusted Interest Rate of 6.85 per cent per
annum. The Swap Rate will fluctuate between the date of these
explanatory notes and 14 June 2017.

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thanks for responding Grimy

my understanding of these bonds is that they are capital bonds and don't necessarily ever get repaid or at least they are never obliged to be repaid. (note to self to check on redeemability)

if that is the case then there will be a new reset notice prior to 15/5/22 which will advise the terms of the new period (presumably another five years).

If the method from your example stays the same the new rate would be the 5 year Swap rate(SR)+ the Issue Margin (IM) + the Specified Margin (SM)
I guess ultimately the question is of the IM and the SM which of these would the company change because if they stay the same the new rate could be quite attractive even if you had paid more than par by purchasing on market.
Complex sums tho.

Edit
N.B they may be redeemed at each notice period. Note however that unlike Mercury's capital bonds (2049) these have no stated redemption date, so they may continue.
If they do I now think both the figures set for the IM and SM will be altered. Its their bond, they can do what they want. and you then choose to accept or offer for resale under their managed facility. Or of course sell them on market.

So these are resetting/redeeming/rolling over next month (15/06). Will be under the ticker VCT110. Perpetual again, but with the first election date of 15/06/2027 (5 years).
Minimum return will be the greater of 5.5% or the swap rate on the 14th of June plus an issue margin of 1.8% (there are other calculations for other scenarios).
I've elected to roll my VCT080 holding into the new issue.

VCT110 rate ended up at 6.23%

Yes i was watching the swap rates going up as the time to set approached... :)

Quote:

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Originally Posted by peat

VCT080.NZ - VCT 15/06/22 5.70% Vector Limited Bonds

These are capital bonds and so... they don't actually have to pay you back for 'kin ages. maybe never, not sure.Attachment 11136

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I was just looking on the NZDX as I have been reading people's views and the idea we are going into a recession that may have a downward effect on equity and house prices which will cause central banks to reduce/suppress interest rates again.

Yields on bonds are currently better than dividend yields and if interest rates are expected to fall then on the secondary market, bond prices might rise as yields fall.

Looking at the list

https://www.nzx.com/markets/NZDX

For example Mercury MCY020 7.3% for a "Capital Bond" described as "structured debt". I assume this means like the Vector ones above they are perpetual but redeemable if it suits the borrower. It must be sh*t if the bond yield is twice the dividend yield. Looking at the depth and volume on the ASB securities site, someone small like me might get out again. No idea of minimum investments or fees for buying and selling on the secondary market.

Best to give ASB Securities a ring I suppose

Where would you go to read the original loan/bond agreement? Mercury must have a copy but does the NZDX have these on file somewhere?

The bond market is not very optimistic on Synlait I see 15% yield. Maybe that is an opportunity maturing next year Dec 2024 described as a "Vanilla Corporate Bond" (again it would be good to see the agreement or at least some experts summary of one).

The sale of all the stainless steel might cover the bondholders even if all the shareholders get wiped out.

Just interested if anyone actively buying/trading the NZDX and any advice for a newbie. Probably should have posted this in the newbies section.

I just googled MYC020 and came up with this.

https://www.mercury.co.nz/investors/...l-bonds-mcy020

Quote:

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Originally Posted by mcdongle

I just googled MYC020 and came up with this.

https://www.mercury.co.nz/investors/...l-bonds-mcy020

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Now you are making me look stupid.

I see only 75 pages of legible writing to get through so will make the effort.

As for Synlait.... Who knows what is actually going on there.

MCY020 The Final Terms sheet was a much better summary, I looked at the trust deed initially which is between Mercury and Guardian Trust so did not read.

A 2049 maturity. The idea to buy yield now in expectation of a financial market crash in the next few years and rates back down to zero. Sounds easy but gets scary if you get locked in to the long term maturities especially if credit markets and liquidity freeze up, capital will be tied up. Although if the volume on the NZDX list is daily a small fry like me might not have a problem.

https://www.nzx.com/markets/NZDX

Bought IPL010 yesterday at 7% as there was a small amount on offer and it matures next year.

The idea requires long term maturities but thought I would go through the process and maybe learn some ins and out. e.g. 21,000 on offer for a brief second when the broker said $98 dollars a unit I panicked as I was suddenly not sure if I was buying $20,580 or $2mill (21,000 * $98). Also brokerage of .07% with a minimum $35. I assumed anything less than $50,000 was $35 (35/.0007) but now not sure I had the decimal point in the right place fees likely to be $144 and minimum trade $5,000 not $50,000.

You live and learn.

Admittedly "share trader" site but wondered if anyone taking a punt on longer dated bonds assuming interest rates have peaked.

ABB080 Is one i have been looking at. Not bought yet though.

You can use the Direct Broking bond calculator at https://www.directbroking.co.nz/dire.../bondcalc.aspx to get an idea of pricing.

Fees/Commissions ex Jardens:

New Zealand listed and unlisted debt securities

Greater of NZ$30.00 per trade or 0.50% of trade value up to NZ$50,000

For trades with a trade value exceeding NZ$50,000, 0.50% for the first NZ$50,000;
plus 0.35% for the portion of the trade value exceeding NZ$50,000

Quote:

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Originally Posted by GTM 3442

You can use the Direct Broking bond calculator at https://www.directbroking.co.nz/dire.../bondcalc.aspx to get an idea of pricing.

Fees/Commissions ex Jardens:

New Zealand listed and unlisted debt securities

Greater of NZ$30.00 per trade or 0.50% of trade value up to NZ$50,000

For trades with a trade value exceeding NZ$50,000, 0.50% for the first NZ$50,000;
plus 0.35% for the portion of the trade value exceeding NZ$50,000

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ASB Securities .7%, I was going to say as an online broker who does not give recommendations I would have thought ASB would be cheaper, but you do have to call them to do the trade.

ABB080, I guess the only requirement for bonds is if the company can refinance at maturity and pay you out and that they are not overleveraged and could go bankrupt. Not sure how you check on the viability of a bank. Obviously some issues in the States but maybe not in NZ. So few banks.

IPL010 was an impulse buy but they lease to countdown and proved pandemic proof so assume they will be recession proof as well. Yield was also over my minimum hurdle rate of 7%. That was my hurdle rate for more risky equity securities not so long ago so just proves I am all over the place.

Do you know what are the main ratios or z scores to check for company viability. Interest times covered, Debt to Equity etc. should be a lot less work for bond buyers compared to equity buyers I would have thought.

P.s. couple of additional thoughts do the NZX companies or their bonds get rated by a credit rating agency and if so how do you check this?

Is there an ASXDX list like the NZXDX one.

Finally I should take this to the newbies thread as it has nothing to do with Vector Bonds.

Some you can buy/sell online with Direct Broking, some you can't. Some are credit rated, some aren't.

https://www.directbroking.co.nz/dire...ratesheet.aspx

https://www.directbroking.co.nz/dire...dinterest.aspx

Quote:

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Originally Posted by GTM 3442

Some you can buy/sell online with Direct Broking, some you can't. Some are credit rated, some aren't.

https://www.directbroking.co.nz/dire...ratesheet.aspx

https://www.directbroking.co.nz/dire...dinterest.aspx

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Thanks for that. Rate sheet is interesting, wonder why Infratil does not have a credit rating. A company whose business plan includes incurring a lot of debt to purchase stable infrastructure assets, I would have thought a credit rating would be desirable.