Swiss Re launched a tender offer on 18 March for a number of Tier 1 perpetual securities, including the AUD fixed and floating securities callable on 25 May 2017.
Swiss Re launched a tender offer on 18 March for a number of Tier 1 perpetual securities, including the AUD fixed and floating securities callable on 25 May 2017. A summary of the key dates and terms is provided below.
Importantly, there is a cap on the total amount that can be accepted under the tender of €750m and there is a priority of tender being:
- 1st priority – €1bn 5.252% Perpetual Step-Up Notes with a call date of 25 May 2016 (ISIN XS0253627136) at €106.00
- 2nd priority – USD$750m 6.854% Perpetual Subordinated Step-Up Preferred Securities with a call date of 25 May 2016 (ISIN US87089AAA60 and USG86303AA52) at USD$106.75
- 3rd priority – AUD$300m 7.635% Perpetual Step-up Notes (ISIN AU3CB002474) and AUD$450m Floating Rate Perpetual Step-Up Notes (ISIN AU3FN000253) both with a call date 25 May 2017 at AUD$108.25 and AUD$99.50 respectively.
In addition to the above, accrued interest will also be paid.
The tender price for the EUR and USD securities appears to be very attractive. At the tender prices offered, the EUR securities would be priced around 5 to 10 basis points (bps) over swap, the USD securities around 50 to 60 bps over swap and the AUD securities around 150 to 160 bps over swap.
Given the very attractive tender offer pricing for the EUR and USD securities that are both in priority to the AUD securities and the €750m total tender cap, it is very possible that there will be limited or no availability remaining for the AUD tender.
Further, if there was remaining availability under the cap for the AUD securities to be tendered, the arranger reserves the rights to treat the fixed and the floating AUD securities differently in the allocation process.
Swiss Re intends to issue a new EUR denominated Tier 1 security. If this issue does not proceed, then the tender can be called off.
Deadline for acceptance of the tender is 31 March 2015, however FIIG Securities’ custodian, JP Morgan, has yet to advise us of their deadline which is typically 3-4 days prior.
All holders of any of the securities subject of the tender will receive an official notification from our Custodial Services team after JP Morgan advise FIIG of the requirements should they wish to participate in the tender.
Since the announcement of the tender, the AUD Swiss Re securities have risen in price and are now trading close to the tender levels.
Given the following:
- Uncertainty of whether there will be any remaining cap for the AUD tender
- The unknown allocation between AUD fixed and floating securities if there is availability
- The possibility of the tender not proceeding if the new EUR denominated Tier 1 security does not proceed
- The inability to trade/settle any securities that are tender until the entire process in completed (likely the first week in April), even if there is no allocation left for AUD securities
Clients may wish to exit now at improved levels with a high level of certainty, albeit slightly below the tender levels. Alternatively they can take the chances in the tender with the possibility of achieving a slightly higher price but no guarantee of allocation and no guarantee of a strong market bid remaining after the tender process. We continue to expect that Swiss Re will call all these securities at first call date.
For more information or a copy of the tender notice, contact your FIIG Representative.
The contents of this document are copyright. Other than under the Copyright Act 1968 (Cth), no part of it may be reproduced or distributed to a third party without FIIG’s prior written permission other than to the recipient’s accountants, tax advisors and lawyers for the purpose of the recipient obtaining advice prior to making any investment decision. FIIG asserts all of its intellectual property rights in relation to this document and reserves its rights to prosecute for breaches of those rights.
Certain statements contained in the information may be statements of future expectations and other forward-looking statements. These statements involve subjective judgement and analysis and may be based on third party sources and are subject to significant known and unknown uncertainties, risks and contingencies outside the control of the company which may cause actual results to vary materially from those expressed or implied by these forward looking statements. Forward-looking statements contained in the information regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this report. Opinions expressed are present opinions only and are subject to change without further notice.
No representation or warranty is given as to the accuracy or completeness of the information contained herein. There is no obligation to update, modify or amend the information or to otherwise notify the recipient if information, opinion, projection, forward-looking statement, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
FIIG shall not have any liability, contingent or otherwise, to any user of the information or to third parties, or any responsibility whatsoever, for the correctness, quality, accuracy, timeliness, pricing, reliability, performance or completeness of the information. In no event will FIIG be liable for any special, indirect, incidental or consequential damages which may be incurred or experienced on account of the user using information even if it has been advised of the possibility of such damages.
FIIG provides general financial product advice only. As a result, this document, and any information or advice, has been provided by FIIG without taking account of your objectives, financial situation and needs. Because of this, you should, before acting on any advice from FIIG, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If this document, or any advice, relates to the acquisition, or possible acquisition, of a particular financial product, you should obtain a product disclosure statement relating to the product and consider the statement before making any decision about whether to acquire the product. Neither FIIG, nor any of its directors, authorised representatives, employees, or agents, makes any representation or warranty as to the reliability, accuracy, or completeness, of this document or any advice. Nor do they accept any liability or responsibility arising in any way (including negligence) for errors in, or omissions from, this document or advice. Any reference to credit ratings of companies, entities or financial products must only be relied upon by a ‘wholesale client’ as that term is defined in section 761G of the Corporations Act 2001 (Cth). FIIG strongly recommends that you seek independent accounting, financial, taxation, and legal advice, tailored to your specific objectives, financial situation or needs, prior to making any investment decision. FIIG does not provide tax advice and is not a registered tax agent or tax (financial) advisor, nor are any of FIIG’s staff or authorised representatives. FIIG does not make a market in the securities or products that may be referred to in this document. A copy of FIIG’s current Financial Services Guide is available at www.fiig.com.au/fsg.
An investment in notes or corporate bonds should not be compared to a bank deposit. Notes and corporate bonds have a greater risk of loss of some or all of an investor’s capital when compared to bank deposits. Past performance of any product described on any communication from FIIG is not a reliable indication of future performance. Forecasts contained in this document are predictive in character and based on assumptions such as a 2.5% p.a. assumed rate of inflation, foreign exchange rates or forward interest rate curves generally available at the time and no reliance should be placed on the accuracy of any forecast information. The actual results may differ substantially from the forecasts and are subject to change without further notice. FIIG is not licensed to provide foreign exchange hedging or deal in foreign exchange contracts services. The information in this document is strictly confidential. If you are not the intended recipient of the information contained in this document, you may not disclose or use the information in any way. No liability is accepted for any unauthorised use of the information contained in this document. FIIG is the owner of the copyright material in this document unless otherwise specified.
The FIIG research analyst certifies that any views expressed in this document accurately reflect their views about the companies and financial products referred to in this document and that their remuneration is not directly or indirectly related to the views of the research analyst. This document is not available for distribution outside Australia and New Zealand and may not be passed on to any third party without the prior written consent of FIIG. FIIG, its directors and employees and related parties may have an interest in the company and any securities issued by the company and earn fees or revenue in relation to dealing in those securities.