On 19 August 2024, Macquarie Group Limited (MGL; ASX: MQG) launched an offer for Macquarie Capital Notes 7 (MCN7, Expected ASX Code: MQGPG) to raise $1 billion, with the ability to raise more or less. The purpose of the transaction is to raise regulatory capital for MGL with the net proceeds to be used for general corporate purposes. The Offer also includes a Reinvestment Offer to eligible Macquarie Capital Notes 3 (MCN3, ASX Code: MQGPC) Holders to reinvest MCN3 in MCN7. The securities are structured as perpetual, subordinated, unsecured and convertible notes. Distributions are discretionary, noncumulative, floating rate payments, franked at the same rate as MGL ordinary shares (currently 40%) and payable on a quarterly basis in arrears until MCN7 are exchanged, redeemed or written- off. The margin is guided to be 2.65-2.85% p.a. above 90-day BBSW.
We recommend that investors Subscribe to the MQGPG Offer. At the left-hand side of the guided range (265bps), we observe an attractive concession to fair value estimates obtained across a number of relative value lenses. We arrive at an estimated fair value in secondary markets between 250 and 255bps, implying a new issue concession of 10-15bps. We view this as good value and in line with current supply demand dynamics in AT1 markets.
