Infratil Infrastructure Bonds
Since 1999 Infratil has undertaken 12 issues of Infrastructure Bonds, or which 8 remain outstanding. The Bonds are unsecured convertible debt obligations of Infratil Limited. As at April 2010 total outstanding issuance amounted to $748 million.
The following FAQ provides details of Bond terms and whom to contact to buy or sell the Bonds or for further information.
Infratil Infrastructure Bonds FAQ
What are Infratil Infrastructure Bonds?
The Infratil Infrastructure Bonds are unsecured, unsubordinated fixed rate convertible debt obligations of Infratil Limited.
The Bonds are listed and all the requirements of NZX have been duly complied with but NZX accepts no responsibility for any statement made by Infratil.What are the maturities, yields and quantities of Bonds on issue?
Maturity Face Value on Issue Coupon (all payable quarterly) 15 Nov 2010 $680,000 7.25% per annum 15 May 2011 $112,087,768 8.25% per annum 15 Nov 2011 $20,000,000 8.50% per annum 15 Nov 2012 $57,396,000 7.75% per annum 15 Sep 2013 $85,276,000 8.50% per annum 15 Nov 2015 $152,835,700 8.50% per annum 15 Feb 2020 $80,497,600 8.50% per annum Perpetual $239,315,100 The coupon rate is reset every 15 November
at 1.5% over the then one year Bank Base RateWhat are the Perpetual Infratil Infrastructure Bonds?
Perpetual Infratil Infrastructure Bonds (PIIBs), are unsecured bonds which do not have a maturity date. In other words, Infratil has no obligation to repay them. This means that, similar to a share, if a Bondholder wishes to cash up their investment they must sell the PIIBs. Infratil Bonds trade on the NZX.Can I trade (buy or sell) Infratil Infrastructure Bonds? What is the price?
All of the Infratil Bonds are listed on the NZX and most trade on a regular basis. Mainly however investors hold to maturity so trading is much less than for Infratil’s shares.
This web site has bids/offers and the last price of listed bonds, including all those issued by Infratil.
As of April 2010 the market yield on most Infratil maturity bonds is about the same as their issue yield.
For instance the Bond maturing November 2015 was issued with a coupon of 8.5%pa meaning that someone buying or selling the bond would receive about $100 per $100 face (not counting any accrued interest or brokerage).
The secondary market price tends to reflect the number of buyers and sellers and will tend to fluctuate over time.What is happening to the yield and the NZX price of the Perpetual Infratil Infrastructure Bonds?
The PiiBs were issued to provide a return of 1.5% over the one year Bank Base Rate and consequently were an attractive investment relative to bank deposits. Initially the coupon rate was 9.0%, for the PiiB’s second year it was reset to 10.27%, for the third year it was 6.95% and the current year the yield is 4.97% per annum.
This year's low coupon reflects the Reserve Bank’s management of short term interest rates in response to the recession and financial crisis. The one year Bank Base Rate is now 3.5% against a long term average of 6.5%.
This low coupon is also having an effect on the NZX price of the PiiBs, which has got as low as $55 per $100 face value although it has recently been at $67 per $100. This still very low price reflects the choice investors have. At present an investor can buy a 5 year Infratil bond to yield 8.5% per annum. If someone buys a PiiB at a price for $67 and receives a coupon of 4.95%, the yield is 7.4% per annum. (ie if you invest $67 and earn $4.90 of interest you will have a yield of 7.4% per annum.)
The reason that investors are willing to accept a yield of 7.4%pa. on PiiB when they can get 8.5%pa. on fixed maturity bonds is probably because they do not expect short term yields to stay as low as they are now. When the one year Bank Base Rates returns to the average level of 6.5%pa. an investor who had acquired a PiiB at $67 would be earning a return of 11.9%pa. ($8 of interest on a PiiB which has cost $67).
As short term yields have fallen, so too has the price on the PiiB. As short term rates have shown signs of rising so has the PiiB price. This is illustrated in the following graph.
Other than buying back a few PiiBs when their price was relatively very attractive, Infratil has essentially been passive as regards their yield and price. This begs the questions “why not increase the coupon rate?” or “why not buy back more of them?”. In both cases the reason is the same. When Infratil makes any investment or funding decision consideration must be given to what is best for the Company as a whole. Increasing the coupon rate on the PiiBs or buying them back at a high price would be transferring value from shareholders to PiiB-holders with no obvious benefit to the Company as a whole.
In any case, as noted, the key need for PiiB-holders is for short term rates to again rise so that this security again provides a good return, which in turn is likely to be reflected in their NZX price.What happens on the maturity of Infratil Bonds?
Because the Bonds are convertible debt obligations Infratil has the right to either repay the Bonds with cash or to redeem the Bonds by issuing Infratil shares. In certain situations (which are detailed in the Investment Statements and Prospectus) Bondholders may demand redemption for shares.
In the past four of the Infratil Bonds have matured and in each case they have been repaid for cash.
What does Infratil use Bond funding for?
Infratil has issued twelve series of Bonds (four have been repaid) and there have been different factors behind each. The first issue in 1999 was of approximately $66 million and was used to purchase an interest in Wellington International Airport. Other issues have similarly been invested in assets Infratil has acquired.What are my rights as a Bondholder?
The Bondholders' rights are set out in the Investment Statement. However as there are technicalities and complexities in some of the terminology contained in this description it is a good idea to talk with a professional adviser such as a broker or financial planner. The Bonds are not subordinated, but in certain situations Bondholders may not have priority claims to the assets owned by Infratil.Do Infratil Infrastructure Bonds have voting rights?
Not usually. In certain extraordinary situations the holders of each class of Bonds may vote on matters that effect them.How do I obtain a copy of the Infratil Infrastructure Bonds Investment Statement or Prospectus for a particular Infrastructure Bond?
To download PDF copies of the Infratil's Infrastructure Bond Investment Statements and Flyers right click on the links below:Bond Maturity Offer Opened 15 Nov 2010 7 Oct 2005 click here (1,726KB) Offer closed 17 November 2005 15 May 2011 22 Dec 2005 click here (2MB) Offer closed 17 March 2006 15 Nov 2011 17 Dec 2001 click here (937KB) Offer closed 3 January 2002 15 Nov 2012 26 Aug 2005 click here (1,725KB) Offer closed 7 October 2005 15 Sep 2013 22 Aug 2003 click here (775KB) Offer closed 11 March 2004 15 Nov 2015 10 Dec 2004 click here (1,649KB) Offer closed 4 February 2005 15 Feb 2020 20 Dec 2005 click here (2MB) Offer closed 2 June 2006 Perpetuals 17 Nov 2006 click here (3MB) Offer closed 30 April 2007 Infratil Infrastructure Bonds Prospectus 2004 right click here (PDF 2MB).
Infratil Infrastructure Bonds Prospectus August 2005 right click here (PDF 3MB).
Infratil Infrastructure Bonds Prospectus December 2005 right click here (PDF 6MB).
Infratil Infrastructure Bonds Prospectus November 2006 right click here (PDF 5MB).
How do I obtain a copy of the Infratil Infrastructure Bonds Trust Deed?
Infratil Infrastructure Bonds Trust Deed click here (PDF 214KB).
Infratil Infrastructure Bonds Trust Deed Amendment dated 14 August 2003
click here (PDF 33KB).Infratil Infrastructure Bonds Trust Deed Amendment dated 15 November 2006
click here (PDF 175KB)."Conformed" Trust Deed incorporating all amendments to the original 11 November 1999 Trust Deed click here (PDF 333KB)
This is a reference document only and the original documentation should always be checked.Who is the Trustee of the Infratil Infrastructure Bonds?
The Trustee is Trustees Executors Limited, Level 1 50 Customhouse Quay, Wellington. Telephone : 04 495 0999.
What is the Trustee’s monitoring role with regards to Infratil compliance with Bond covenants and terms?
The terms of Infratil’s Bonds are set out in their individual prospectus and trust deeds (and summarised in the relevant Investment Statement). Each six months Infratil provides the Trustee with a certificate signed by directors confirming its position relative to the Bond covenants and with regards to general compliance with Bond terms. Infratil has always recorded conformity. Bondholders are welcome to contact the Trustee to confirm Infratil’s compliance.
What are the contact details of brokers who trade Infratil Infrastructure Bonds?
ANZ NATIONAL BANK
Level 7, 1 Victoria Street
Wellington
Free Phone (New Zealand): 0800 626 966Ben Petro Contact: Ben Petro Jones
Email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view itCRAIGS INVESTMENT PARTNERS
102-104 Spring Street
Tauranga
New Zealand: 07 577 6049Contact: Murray Birkett
Email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view itDIRECT BROKING
20 Panama Street
Wellington
Free Phone (New Zealand): 0800 800 372Contact: David Speight
Email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view itFIRST NZ SECURITIES
Level 20, ANZ Centre
23-29 Albert Street
Auckland
Free Phone (New Zealand): 0800 805 584Contact: Jo Hikaka
Email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view itFORSYTH BARR
Forsyth Barr House
Cnr Lambton Quay & Johnston Street
Wellington
Free Phone (New Zealand): 0800 367 227Contact: Max Brown
Email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view itMCDOUALL STUART SECURITIES
Level 8, ASB Tower
2 Hunter Street
Wellington
Free Phone (New Zealand):0800 577 777Contact: Andrew McDouall
Email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view itWESTPAC INSTITUTIONAL BANK
PO Box 691,
Wellington
Free Phone (New Zealand):0800 489 222Contact: Tim Butterfield
Email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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