On 23 October 2023, Judo Capital Holding Limited (ASX: JDO, ‘Judo’, ‘Group’, ‘Issuer’) launched an offer for Judo Capital Notes (the Notes, expected ASX Code: JDOPA) to raise $75 million, with the ability to raise more or less. The purpose of the transaction is to fund regulatory capital (Additional Tier 1) for its wholly owned operating subsidiary, Judo Bank Pty Ltd (Judo Bank).
The securities are structured as subordinated, unsecured, convertible, and perpetual capital notes. Distributions are discretionary, non-cumulative, floating rate, and may be unfranked or partially or fully franked, paid on a quarterly basis in arrears. As at 30 June 2023, Judo has a franking credit balance of $36 million. In the event of a partially franked or unfranked distribution, the cash portion of the distribution will be increased to compensate. The margin is guided at 6.25-6.50% p.a. above 90-day BBSW.
This security has no fixed maturity date but is scheduled for mandatory conversion into JDO ordinary shares on 16 Nov 2031, or later, when conversion conditions have been satisfied. Subject to APRA approval, JDO has the right to redeem or resell the Notes for cash at face value or convert the Notes into JDO ordinary shares on 16 Feb 2029, 16 May 2029, 16 Aug 2029, 16 Nov 2029. The Notes may also be converted, redeemed, or resold if a Tax or Regulatory Event occurs, subject to APRA approval. The Notes will convert into JDO ordinary shares following an Acquisition Event, subject to conversion conditions. The security qualifies as eligible AT1 capital, and so contains loss absorbing terms and conditions known as a Common Equity Capital Trigger and Non-Viability Trigger Events. Upon the occurrence of either of these events, this security will be automatically converted into JDO ordinary shares or written-off without the protection of conversion conditions. If conversion cannot occur for any reason within 5 business days, the Notes will be written-off and all Holders' rights terminated.
We recommend that investors with higher risk appetites Subscribe, as JDOPA is offered with a new issue concession on its inaugural AT1 transaction. Our research shows this deal to be offered at the highest ever margin on A$ AT1 primary. Crucially, we have fundamental credit comfort with the issuer, given the strong capitalisation and improving profitability, however we highlight the security has a Very High risk score.
