IFTHA Infratil Perpetuals

[Southern Lad]

compulsory acquisition
If any person, or group of Associated Persons, becomes entitled or bound to compulsorily acquire Shares held by any minority Shareholders, Bondholders will be given the option to redeem their Infrastructure Bonds for cash at their $1.00 Face Value

The wording doesn’t appear to cover a change on control via a Scheme of Arrangement. If someone succeeds getting 75% of shareholders to agree to a SoA, then I assume you could get a 100% change in ownership of IFT without the compulsory acquisition threshold (90%) coming into play. If so, IFTHA bondholders may be forced to go along for the ride.

[Grimy]

Up to 77.85 at present. 78 the high for the past year. With interest rates on the rise these may climb further. I've been a holder for years and the current price is well above my average cost. Certainly the interest return has been average for a while (but still better than a call account). Tempted to sell and buy IFT shares, but just know that as soon as I do IFT will announce they are buying these back at $1.00.....
Closed up at .785 today

[Grimy]

3.14% reset for the next 12 months just announced. At my average buy price takes it over 5% yield, so guess I'll be staying put for now.

[Arthur]

I've have always wondered why Infratil don't buy more of these back and cancel these when they have excess capital. Instant and safe 25% capital gain for them at these prices. They would have made closer to 100% a while ago. I get that they helped diversify funding in the early days, but now they are a minor source of their debt.

[Grimy]

Yes, I don't know what rules there are for buying back on-market, but if they can it's what I would have done in their position.
They seem to have made it clear they don't want to buy back at face value for various reasons and are happy to let them run as perpetuals.
I guess paying nothing for them is cheaper than paying 79 cents.

[GTM 3442]

A welcome reset of the interest rate from 3.14% to 6.45%

I don't imagine that (m)any on the forum bought these at a buck a pop, so it's a pretty good rate.

[Grimy]

Yes, I'm happy with my new 11.5% rate.......

[causecelebre]

Hi, i'm new to bonds and more so perps and hoping for answers to a few questions and some specific to IFTHA. Sorry in advance i'm still learning about this:

1. Does the current yield based calculation factor that bond will be called at face value?
2. Generally in a rising interest rate environment current price should increase and vice versa in a falling rate environment? If so why would the price dropped today?
3. Total return is a factor of the average coupon for the holding period and the purchase and selling price?
4. At todays price of 0.74 would these still be considered good buying?

TIA

[Newman]

After you finish reading from page 1 of this thread, you can answer your questions except for Q2. Generally speaking, when the interest rate increases, the bond value goes down.

[causecelebre]

Thanks Newman. I have read the whole thread and i believe I have answers to most of the questions yet they are inferred and hence I was asking for explicit answers.

Your answer to Q2 leaves me wondering though. I see how that works for fixed coupon bonds: as interest rates go up bond investors sell their current bonds for higher yielding bonds and thus prices for the lower yielding bonds decreases. However, in the case of IFTHA the interest rate may increase making them more desirable thus increasing the price?