By Richard Braddell
WELLINGTON - US-based Edison Mission Energy is to proceed with New Zealand's largest redeemable preference share issue to retail investors.
The $240 million capital raising move is to refinance part of Edison's 40 per cent stake in Contact Energy, and is being offered on a first-come, first-served, basis. The
offering will close on or before November 12 and will be sold in $1000 lots with a minimum parcel of 5000 $1 shares.
The issue could be followed by another next year which could be used to refinance $160 million of the shares sold yesterday to the National Bank of New Zealand.
The retail offering is being made through a newly created company, Edison Contact Finance, and offers dividend rates of 5 per cent for the two-year maturity, 5.5 per cent for three years, and 5.75 per cent for four years.
A key feature of the offering, which is aimed specifically at New Zealand investors, is the full imputation of dividends which will result in a pre-tax yield of 8.58 per cent on the four year maturity for a taxpayer on the top marginal rate of 33 per cent.
The equivalents for the two and three year maturities are 7.46 per cent and 8.21 per cent. Taxpayers on lower marginal tax rates may have credits left over to offset against other income.
The issue differs from a bond in that it pays a fully-imputed dividend instead of interest and is backed with capped top-up guarantees from Edison Mission should Contact dividend streams be insufficient to cover redeemable preference share dividends. Edison Contact Finance will also have a mortgage over the relevant Contact shares.
