FIIG’s debt capital markets (DCM) division recently arranged a $30m tap issue for WA Stockwell, adding to the issuer’s existing $50m notes due August 2026. WIRE editor, Jon Sheridan, caught up with James Vance, the DCM director responsible for the transaction, to discuss the deal.
Jon: WA Stockwell is the parent company of the Stockwell Property Group – what can you tell me about this group?
James: The Stockwell Property Group is a Queensland based diversified property group with a history of over 65 years in property development, property investment, design & construction and property management. In the last 25 years, the group has delivered properties valued in excess of $2 billion across the retail, commercial, industrial, residential and retirement living property sectors.
Jon: Stockwell are not new to FIIG – what has been our history with them?
James: We first met Stockwell in 2015 when we arranged a $35m amortising bond for them, providing capital for their development pipeline. The bond was supported by their strong balance sheet including investments in non-discretionary shopping centres. When Stockwell were looking to acquire another shopping centre in 2019 (the Noosa Civic Shopping Centre), we refinanced their original bond with a $50m 7% bond issue due August 2026. Consequently we have developed a long term relationship with Stockwell and an extensive knowledge of their business.
Jon: The recent Stockwell issue was a “tap” issue, so did not replace the existing bond but rather added to it. Why did Stockwell take this route?
James: Stockwell had only issued the $50m bond in August 2019 so had many years until the debt was due (in 2026). They were also happy with the terms including the existing financial covenants and principal amortisation profile (reducing from $1,000 per Note to $280 per Note over the 7 year term). We were also able to add various financial covenants and security that bolstered bond holder protections. Consequently it was more efficient to add to the existing bond issue rather than replace it.
Jon: Has Stockwell’s business changed since 2019 to cater for the increased debt levels, including debt serviceability, associated with the $30m tap issue?
James: Yes, their business had grown considerably with increased assets and earnings, particularly their recurring income associated with their investment portfolio and funds management businesses. Their current development pipeline also has strong visibility and immediate term reliability having achieved DA and other project milestones.
Jon: Finally, the bond was issued at a slight discount to par – why was that?
James: As with any tap issue, the coupon is fixed (in this case 7%) however the current market price can be different. The Stockwell bond had traded at a significant discount to par during the COVID-19 market disruption / dislocation, not due to specific credit issues relating to the group. As markets recovered pricing came back towards par. In order to assure the entire volume could be sold, Stockwell offered a slight discount to par (higher yield of 7.25%) to attract this level of demand.