New Issue: Suncorp Capital Notes 4

On 30/08/21, Suncorp Group (ASX: SUN) launched an offer for Suncorp Capital Notes 4 (ASX: SUNPI, to raise $350 million, with the ability to raise more or less.

SUNPI are structured as redeemable, perpetual, unsecured, convertible and subordinated notes. The purpose of the transaction is to raise regulatory capital (Additional Tier 1) for SUN. The margin is guided at 2.90% to 3.10% p.a. above 90-day BBSW. Distributions are expected to be discretionary, non-cumulative, floating rate, fully franked, and paid on a quarterly basis in arrears.

This security has no fixed maturity date but is scheduled for mandatory conversion into SUN ordinary shares on 17 December 2030, or later, when conversion conditions have been satisfied. At SUN’s discretion, the Notes can be redeemed, resold or converted into SUN ordinary shares on 19 June 2028, 18 September 2028 or 15 December 2028, or if a Tax or Regulatory Event occurs, subject to conditions and APRA approval. At SUN’s discretion, conversion (but not redemption or resale) may also happen if a Potential Acquisition Event occurs, subject to conditions and APRA approval.

We see fair value around the 285-290bps margin mark and at an offered margin of 290-310bps we recommend investors Subscribe due to our fundamental credit comfort.