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  1. #1
    Advanced Member BIRMANBOY's Avatar
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    Default ANZ Capital Notes Issue March 2015

    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.
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  2. #2
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    Quote Originally Posted by BIRMANBOY View Post
    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.

  3. #3
    Advanced Member BIRMANBOY's Avatar
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    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
    Quote Originally Posted by Sideshow Bob View Post
    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.
    Last edited by BIRMANBOY; 09-03-2015 at 04:19 PM.
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  4. #4
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    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

  5. #5
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    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.

  6. #6
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    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.

  7. #7
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    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.

  8. #8
    Ignorant. Just ignorant.
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    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.
    Last edited by GTM 3442; 10-03-2015 at 05:46 PM. Reason: punctuation

  9. #9
    Advanced Member BIRMANBOY's Avatar
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    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.
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    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.

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