KEY POINTS:
What is it called and what sort of savings product is it?
The Yellow Pages Group has launched a subordinated bond offer. The consortium is aiming to raise up to $150 million from investors through the offer.
Who is the company behind it?
Yellow Pages
is a consortium of made up of private equity group CCMP Capital Asia and Teachers' Private Capital, which is the private investment arm of Ontario Teachers' Pension Plan. This group bought Yellow Pages from Telecom in April for $2.4 billion. The money raised from this subordinated bond offer will be used to finance that acquisition.
Who is the target market?
Fixed-interest investors prepared to take on a bit of risk.
What return does it offer?
The offer is paying a minimum of 11 per cent.
When was it launched?
The offer was registered on August 28 and it will be closing on October 16.
What other products is it like or is it competing with?
This offer is bound to attract the attention of people who are currently investing in finance companies.
Is it long term, short term or medium term?
The bonds have a six-year term.
What is the unique selling point of this product?
The interest rate of 11 per cent is clearly very attractive, especially when it is lined up against finance company offers. Also sweetening the offer is news that bondholders will get preferential entitlements and a discount on shares if Yellow Pages decides to go ahead with an initial public offering at some time in the future.
How strong a stomach do you need for it?
Using the risk/return rule, one would say that at 11 per cent that this is a higher risk investment. However, it seems that the risk is better priced than what is happening in the finance company sector at the moment.
What's the hitch?
The main hitch is that investors are taking on a similar level of risk in this company as someone who has an equity stake. However, the bondholder is limited in the amount of return he or she will get, while someone with an equity stake gets to participate in any further upside performance.
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