What is it called and what sort of savings product is it?
Origin Energy Contact Finance No 2 is issuing up to $250 million in preference shares.
Who is the company behind it?
Origin Energy Limited is a large diversified Australasian energy company, which is
listed on the ASX and has a market capitalisation of more than A$8 billion (NZ$9.58b). Its assets include a 51.4 per cent stake in Contact Energy as well as a 50 per cent interest in the Kupe gas project, off Taranaki.
Who is the target market?
Fixed-interest investors who are looking for a high-yielding investment grade offer.
What return does it offer?
The offer says it will pay a minimum gross dividend rate for the first 12-month period of 10 per cent. The dividends will consist of a combination of cash payments and imputation credits. Future dividends will be reset annually at 1.50 per cent over the one-year benchmark swap rate.
When was it launched?
The offer opened on September 4 and it is scheduled to close on October 5.
What other products in the marketplace is it like or is it competing with?
This offer goes up against the raft of existing corporate debt offers in the market.
Is it long term, short term or medium term?
The preference shares don't have a maturity date, however they are best suited to medium to long-term investors.
What is the unique selling point of the product?
In the current market the fact that these preference shares have investment grade credit ratings of BBB- and BBB by Standard and Poor's and Fitch Ratings respectively is a plus. Added to that, Origin Energy has given some undertakings which say that ordinary shareholders won't get dividends if dividends aren't paid to preference shareholders.
How strong a stomach do you need for it?
An investment grade rating with a rate of 10 per cent looks pretty attractive.
What's the hitch?
Future dividend payments are likely to be lower as the interest market comes down from its cyclical peaks. Finding an investment statement, without going to a broker, is difficult.
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