On 11 October 2021, Australian Unity Limited (‘AYU’) launched an offer for Australian Unity Mutual Capital Instruments (ASX: AYUPA) seeking to raise $160 million at a price of $103 per security, with the ability to raise more or less.
AYU initially launched AYUPA in December 2020, raising $120 million at $100 per security (Face Value). These securities will be fully fungible with existing AYUPA securities and will trade on the ASX under the same ticker. The purpose of this tap is to raise capital for AYU which will be used to pursue near-term growth opportunities within individual business segments, repay existing debt facilities and possibly fund future acquisitions opportunities.
These securities are structured as perpetual, fully-paid mutual capital instruments. They have no security over the assets of the Issuer and are contractually subordinated to all creditors. Additionally, the securities are structurally subordinated.
Distributions are discretionary, non-cumulative, fixed rate, fully franked and paid on a semi-annual basis in arrears at a fixed interest rate of net 5.00% per annum (gross 7.14% p.a. on a franked basis) based on the Face Value.
Holders have no right to request AYU repurchase these securities. AYU has the right to repurchase the securities in full on the occurrence of a Tax or Regulatory event. In the event of a Demutualisation Event, AYU must repurchase the securities at 101% of Face Value.
Relative value is difficult to ascertain, however, our analysis suggests an appropriate new issue concession is offered and the security screens to the cheap (bond vernacular for attractive) side of fair on such basis. In the context of a broad and diversified portfolio we recommend investors Subscribe.