Tuesday 11 July 2017 by FIIG Securities twinbabies Company updates

Two good news stories

G8 Education called its fixed rate bond and Moody’s announced that RWH Finance’s indexed annuity bonds are on review for an upgrade

G8 Education

Late last week, G8 Education announced that it was calling its fixed rate bonds and that funds would be returned to bondholders. G8 will exercise its right of early redemption in respect of all its AUD70m 7.65% fixed interest notes due 7 August 2019 (ISIN: AU3CB0212140) (Notes).

The call only relates to the fixed rate bonds and not the floating rate notes.

The redemption of the Notes will occur on 7 August 2017. On redemption, Noteholders will receive, for each Note, an amount equal to 102% of the outstanding principal amount of the Note. Noteholders will also receive the interest payable on the Notes for the period ending on the redemption date.

Over the life of the bond, it has performed well, with the price never falling below its $100 face value and reaching a peak of around $108, delivering handsome rewards to investors that bought at first issue and sold early 2015.

RWH Finance

Credit ratings agency Moody’s has placed the senior secured rating on RWH Finance Pty Ltd’s AUD145m indexed annuity bonds (IABs) on review for upgrade. This follows the progress achieved by RWH in arranging the refinancing of its AUD148m of nominal bonds.

The rating agency expects the ratings of the IABs will likely be upgraded multiple notches on completion of the refinancing process.

Opportunities for reinvestment

We expect substantial sums to be returned to bondholders over the next couple of months, in a very tight market. There are limited opportunities to reinvest and exiting prior to other holders may improve the scope of opportunities available.

If you are interested in exercising the option to sell early, current bids are as follows:

  1. G8 Education’s fixed rate bond is bid at $102, with just short of a month until repayment.
  2. RWH’s nominal bonds are bid at $99.60.
Usually liquidity is available up until a week or two prior to redemption.

High yield

A natural switch out of G8 Education would be into other FIIG originated high yield bonds. However, supply is constrained. One bond we have available in size is the MacKay Sugar fixed rate 2018 bond. Yields have risen rapidly in recent months as sugar prices deteriorated and the company imposed a $2 levy per tonne processed to help reduce debt.

Sugar, as a commodity has had a poor year with prices down circa 40%. For more on the company, please see links to previous articles at the end of this note.

Another option may be the US high yield space. Please refer to the article “USD bond yields given credit ratings – Part 2”, also published this week.

Investment grade

Our favoured investment grade bond, as a possible replacement for the RWH’s nominal bonds is the Liberty fixed rate June 2020 bond, with a current price of $100.99 and a yield of 4.73% pa.

We have had limited supply of various RMBS tranches in recent weeks, which may also be of interest.


For more information, please call your local relationship manager.