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Solid metal fixed interest alternative

Macquarie Equities has launched a commodities-backed fixed interest fund, promoting it as a safe alternative to finance company investments.

Monday, July 31st 2006, 11:18AM
It is hoping to raise up to $200 million for the fund which will be listed on the NZDX market. The fund is expected to pay 8.20% a year over its five year term.

The company is seeking a Standard and Poor's rating on the bonds. This will not be made until the bonds are listed on 14 September, but it is expected to be a "high investment grade."

Macquarie’s head of alterative assets, Craig Swanger says there is still a lot of demand for investment products but in the wake of finance company collapses, a lot of nervousness.

"The New Zealand market has a large amount of cash looking for somewhere to go at the moment."

He says the bond is aimed at investors who are prepared to do a bit more thinking about their investing. There is still a considerable lack of knowledge about some investment issues, notably credit ratings.

"People see credit rating and make the leap to thinking it is risk free," he says.

"It's like the advertisements which tell you something is 95% fat free. There is still 5% fat there."

Rather ratings are "simply a definition of average default risk and through time have proven a
strong indicator of default probability."

TCW Asset Management Company, a subsidiary of one of Europe’s largest investment banks Société Générale Asset Management, has been appointed to manage the fund.

TCW can select commodities from the base metals (aluminium, copper, nickel, lead, tin, zinc), precious metals (gold, silver, platinum and palladium) and energy (oil and gas) sectors.

The return depends on the prices of the commodities selected by the manager staying above specified levels. The repayment of principal depends on the prices of the commodities selected staying above specified levels

The fact that those levels are mostly set lower than historic record low prices means less risk, Swanger says.

Commodity Bonds key points

  • Minimum 8.20% annually (final coupon payment to be determined at close of offer period)
  • Investment grade credit rating monitored by Standard & Poor’s
  • Managed by TCW, a subsidiary of Societie Generale, with significant structured product management expertise
  • IPO is for $100 million with oversubscriptions of a further $100m
  • Minimum investment $5000
  • Expected listing on the secondary market provisionally scheduled for September 14
  • Offer opens 24 July 2006 and closes 31 August 2006
  • Maturity date 7 September 2011
  • Earlybird interest of 8.20% paid on subscriptions calculated from the business day following receipt to the Issue Date.
« Macquarie looks for diversity with Commodity BondsThe future arrives: TOWER launches global commodities fund »

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.29 2.59 2.65
ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.89 3.19 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
HSBC Special - 1.99 - -
Lender Flt 1yr 2yr 3yr
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.79 3.04 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 2.79 2.79 3.15
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.29 2.29 2.65
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.29 2.59 2.79
The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
TSB Bank 5.34 3.09 3.29 3.45
TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.29 2.69 2.79
Median 4.55 2.79 2.99 2.80

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