Challenger (ASX: CGF) announced today that because of the significantly disrupted investment market conditions and volatility in recent weeks caused by the coronavirus pandemic, it was unable to proceed with a replacement issue in time to Redeem or Resell the Challenger Capital Notes (ASX: CGFPA) by the Optional Exchange Date (25 May 2020).
Ordinarily this action would commence a two-year period at the end of which the Notes would mandatorily convert into ordinary Challenger shares on or after 25 May 2022. This is also subject to some Mandatory Conversion Conditions which are designed to protect Noteholders against receiving ordinary shares worth significantly less than $101 per $100 Note.
As we have previously advised, this decision by Challenger was one of practically only two it could have undertaken – the other being a conversion into ordinary shares at the Optional Exchange Date.
Very importantly, the Australian Prudential Regulatory Authority (APRA) has given Challenger confirmation that the Group can, subject to the conditions applying to an existing exchange (including APRA’s subsequent approval), repurchase, or procure the repurchase of, all or some of the Challenger Capital Notes on any future Distribution Payment Date up to (but not including) 25 May 2022.
Challenger intends to launch a replacement offer with the proceeds used to repay the Notes at a future date, subject to market conditions improving.
Quarterly distribution payments will continue to be made with the next Distribution Payment Date being 25 May 2020.