Tuesday 27 September 2016 by FIIG Research Company updates

Company updates — Emeco, National Capital Trust III, NAB, Suncorp subsidiary AAI and StockCo

Company updates galore as Emeco signed a binding restructuring support agreement, NABCAP Tier 1 set to mature, StockCo launched a medium term note issue, AAI launched a Tier 2 issue and two new NAB DirectBonds are now available to wholesale investors


Emeco has announced that it has signed a binding restructuring support agreement with peer unlisted equipment hire companies Orionstone and Andy’s Earthmovers. The agreement establishes a framework for the proposed recapitalisation of Emeco, a three way merger between the companies and a $20m equity investment from existing Emeco shareholders through a $20m rights issue.

More information is available here.External link - opens in a new window

NABCAP Tier 1 set to call

National Capital Trust III, a subsidiary of National Australia Bank (NAB), is set to call its Tier 1 NABCAP floating rate note on 30 September 2016, with an expected principal pay date on 4 October 2016*. Clients who have invested in NABCAP but who wish to switch out upon call could consider the recently issued NAB 2026 subordinated Tier 2 bonds with a call date in 2021, retaining exposure to the major bank.

We have both NAB 2026 fixed and floating rate bonds indicatively offered at the following as of 27 September 2016:

  • NAB Tier 2 floating rate 2026: indicative 102.758 premium to par (YTW^ 3.72%), minimum parcels of $10,000
  • NAB Tier 2 fixed rate 2026: indicative 101.853 premium to par (YTW^ 3.59%), minimum parcels of $10,000

We consider the NAB 2026 subordinated Tier 2 bonds good alternatives for investors wanting slightly longer dated investments. Further, the NAB 2026 bonds are available to wholesale investors in smaller parcels of $10,000, in comparison to the NABCAP Tier 1 which had a minimum parcel size of $50,000.

*Due to the terms and conditions of this instrument, the final principal is not paid on the call date but on 4 October 2016.

^The yield to worst (YTW) is the lowest yield an investor can expect when investing in a callable bond.

Note: Pricing is indicative as of 27 September 2016. Please contact your FIIG representative for further information on the NAB 2026 bonds, available to wholesale investors in minimum parcels of $10,000.

NAB DirectBonds now available to wholesale investors

Two new NAB subordinated Tier 2 Notes are now available as DirectBonds to wholesale investors, in minimum face value parcels of $10,000.

Brief company overview

National Australia Bank Ltd (NAB) is one of the four major banks in Australia in terms of market capitalisation and customers. Australian banks, including NAB, benefit from operating in an economy with a very high degree of economic resilience, institutional and government financial strength, and a low susceptibility to event risk. NAB is supported by strong capital ratios and a highly regarded prudential regulator in APRA.

More information is available here.External link - opens in a new window

StockCo Holdings launches $30m subordinated 8.75% fixed rate notes

Agricultural financier StockCo Holdings has announced the launch of a $30m medium term note issue, available to wholesale clients with a minimum investment of A$50,000.

Brief company overview

StockCo is a private company which provides specialty livestock finance. StockCo fund 100% of the value of livestock as they are purchased for the final, or “finishing”, stage of the livestock’s lifecycle. StockCo takes first ranking security over the livestock assets, and maintains full recourse to the borrower and related entities, including the ability to mortgage any real assets.

More information is available here.External link - opens in a new window

Suncorp subsidiary AAI returns to the Australian domestic market with new Tier 2 issue

Suncorp Group’s insurance subsidiary, AAI Limited, has launched a new Australian dollar denominated subordinated Tier 2 transaction, available to wholesale investors. The 26 year floating rate notes, with a non call six year structure, are priced at 320 basis points (bps) over three month bank bill swap rate (BBSW). The notes are rated investment grade at BBB+/A3/A, with total volume of A$330m.

The primary issue has since closed and was oversubscribed, but will be available on the secondary market from settlement date of 6 October 2016. AAI Limited last issued in the Australian domestic market in November 2015, when it priced A$225m of 25 year, non call five year structured Tier 2 bonds at 330bps over BBSW.

Brief company overview

AAI Limited is one of the largest general insurers in Australia, underwriting mainly motor, home and compulsory third party insurance for individual and commercial clients. It is the main operating general insurance company for Suncorp Group Limited.