On 13 October 2020, Challenger Ltd (ASX: CGF) launched an offer for Challenger Capital Notes 3 (CCN3, ASX: CGFPC), to raise $250 million, with the ability to raise more or less. The offer is accompanied by a Reinvestment Offer and Repurchase Invitation for holders of the existing Capital Notes 1 (CCN1, ASX: CGFPA). These securities are perpetual, unsecured, convertible, redeemable, subordinated notes. The purpose of the transaction is to raise regulatory capital (Additional Tier 1) for Challenger Life Company Ltd (CLC). The margin is guided at 4.60% to 4.80% p.a. above 90-day BBSW and distributions are expected to be initially partially franked, floating rate, discretionary, non-cumulative, subject to Payment Conditions and paid on a quarterly basis in arrears.
This security has no fixed maturity date but is scheduled for mandatory conversion into CGF ordinary shares on 25 May 2028, or later when conversion conditions are satisfied. At the Issuer’s discretion, and subject to approval by APRA, the Notes may be redeemed or resold for cash or converted into CGF ordinary shares on 25 May 2026. The Notes may also be redeemed if a Tax or Regulatory Event occurs. The Notes will convert into CGF ordinary shares following an Acquisition Event, subject to conversion conditions.
As this security meets the capital instrument eligibility criteria under Basel III, it also contains the loss absorbing terms and condition known in the documentation as a Non-Viability Trigger Event. Upon the occurrence of this event, the security will be converted into CGF ordinary shares without the protection of conversion conditions and capped by a maximum conversion number. Conversion calculation ratios are set based on Issue Date VWAP and will be updated once known. If conversion cannot occur for any reason the Notes will be written off and all Holders' rights terminated.
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