KEY POINTS:
What is it called and what sort of savings product is it?
Allied Farmers is looking to raise up to $30 million in a capital notes issue.
Who is the company behind it?
Allied Farmers is an NZX-listed diversified rural services group with businesses that include merchandising, livestock, real estate, wool and short-term lending; finance company activity offering a wide range of lending products throughout New Zealand; and timber milling based in Wanganui. It also owns Allied Prime Finance.
Who is the target market?
This is one which appeals to fixed-interest investors prepared to take on quite a bit of risk.
What return does it offer?
The notes are forecast to pay a return of 9.60 per cent annually with quarterly interest payments.
When was it launched?
March 13. The offer closes on April 27.
What other products is it like or is it competing with?
It is another competitor in the crowded listed debt market.
Is it long term, short term or medium term?
The notes have a maturity date of November 15, 2011. However, they will be listed on the NZDX and will be tradeable.
What is the unique selling point?
The offer is being sold on rate and its NZDX listing which aren't huge selling points. The other aspect people may like is getting some exposure to the rural sector.
How strong a stomach do you need for it?
Very.
What's the hitch?
Smaller companies like Allied (market capitalisation of $32 million) offering capital notes have received a fair bit of criticism, mainly because they are small and don't have a large capital base and not hugely consistent cash flows. As well, the interest rates offered are generally too low for the risk. People buying these notes are last in line if something goes wrong and recent history shows there is generally nothing left at payout time should the worst eventuate. Investors wanting to buy into a company like this should consider whether they want equity exposure or debt exposure.
