On 30 October 2023 Australian Unity Limited (Issuer; ASX: AYU) launched an offer for Australian Unity Bonds Series E (ASX: AYUHE) seeking to raise $180 million, with the ability to raise more or less subject to a minimum offer size of $50 million. No Bonds will be issued if application monies are less than the minimum. Proceeds will be used to refinance the repurchase of Australian Unity Bonds Series C (ASX: AYUHC) through the reinvestment offer and for general corporate purposes.
The securities are unsubordinated and unsecured debt obligations. They are structured as Simple Corporate Bonds meaning they have no optionality and interest payments are mandatory. To qualify as a Simple Corporate Bond, these securities have met specific legal eligibility requirements on the Issuer and the security itself.
The Bonds pay floating rate interest payments, payable quarterly in arrears on 14 January, April, July, and October each year until maturity or any earlier redemption date. The margin is guided at 2.50-2.70% p.a. above 90-Day BBSW.
The Bonds may only be redeemed on their legal final maturity date of 15 December 2028 or when a Tax Event, Change of Control Event, or a Clean Up Condition exists.
We recommend investors Subscribe. AYUHE is offered at a concessional credit spread, which is 50bps wider than last time it issued at this tenor in October 2019. Since then, AYU has issued a net $342 million of subordinated preference equity capital via Mutual Capital Instruments. This has been a material positive to the senior credit profile – meaning that tighter, not wider pricing would have been expected under the same market conditions. Credit fundamentals of the diversified business have continued to improve and despite an uncertain outlook we have continuing confidence in credit quality. Despite HoldCo status, AYUHE is otherwise structured favourably to investors in our opinion via a strong covenant package.
