Quote Originally Posted by Lizard View Post
Hi Kiwitrev,

As I understand it, this isn't a "re-marketing process", so you don't get the chance to make any choice. Downers have allowed them to "step-up", which means an additional 2% step-up margin has been added to the original 2.05% margin (set on book build) over the benchmark 1 year swap rate and they have become perpetual securities.

The rate is now re-set annually until such time as Downer is either taken over or decides to redeem them or to exchange the ROADS for ordinary shares in DOW (I think they can still do this on any dividend date). Obligations are affected by a takeover of Downer. Dividends are non-cumulative and Downer could potentially stop payment, but this will affect the ability of DOW to pay dividends on ordinary shares and would be a last resort.

I guess at around 75% of face value, the effective yield to buy on market now is 8.8% for one year, but perpetual and indexed. A good yield, but reflects risks.
If the 1 year SWAP rate increases to 3.5% on June 15 next year then WKSHA would be paid an interest rate of 7.55%. For thos who bought the prpetual bonds at 75 cents the effectice reurn would be 10%. If interest rate in NZ increases further it would be expensive for Downer to pay a margin of 4.05%. Would not it be better for them to convert the bonds to shares?