ANZ CPS2 Convertible Preference Shares

[The Owls]

Being relative new to share tranding we would appreciate some comments and exactly what are Convertable Preference Shares. We hold ANZ shares in own Super Fund. We require low risk to our capital as the dividends are our source of income.

 

[boofhead]

The prospectus details most of what you want to know. There is a thread dedicated to hybrid securities which may be of help too. Some details of ANZPA in the ANZ thread. The price of the security is more closely tied to market 90 day interest rates than most securities.

 

[Wysiwyg]

Being relative new to share tranding we would appreciate some comments and exactly what are Convertable Preference Shares. We hold ANZ shares in own Super Fund. We require low risk to our capital as the dividends are our source of income.

An example of the conversion to ordinary shares on the Mandatory Conversion Date in 6 years. I don't understand this T. Owls. Issue Price/99% x Volume Weighted Average Price. Can anyone give an example of what exactly 1 Pref. would equal?

If CPS2 are Converted, CPS2 Holders will receive a number of
Ordinary Shares per CPS2 that is equivalent to the number calculated
using the following formula:

Issue Price
-----------
99% x VW AP

 

[awg]

An example of the conversion to ordinary shares on the Mandatory Conversion Date in 6 years. I don't understand this T. Owls. Issue Price/99% x Volume Weighted Average Price. Can anyone give an example of what exactly 1 Pref. would equal?

This basically means you get a 1% discount at the time of conversion.

Example: if the ANZ and ANZCPS were identical price at conversion you would recieve 101 ANZ for your 100 CPS.

Is that what you were asking?

 

[Wysiwyg]

This basically means you get a 1% discount at the time of conversion.

Example: if the ANZ and ANZCPS were identical price at conversion you would recieve 101 ANZ for your 100 CPS.

Is that what you were asking?

No that doesn't look right. Hypothetically speaking if the VWA share price is the same in 6 years then it is only the dividends that would be made. 100 preference shares for 101 ANZ fpo would hardly be a fair trade off. The other formula to convert is this assuming a VWAP of $22.40....

Issue Price $100.00
Divided by Issue Date VW AP × 0.5 ÷ $11.20
Indicative Maximum Conversion Number 8.9286

 

[awg]

No that doesn't look right. Hypothetically speaking if the VWA share price is the same in 6 years then it is only the dividends that would be made. 100 preference shares for 101 ANZ fpo would hardly be a fair trade off. The other formula to convert is this assuming a VWAP of $22.40....

Now you have me really confused

If you go to page 5 of the prospectus, to the Paragraph "Mandatory Conversion or Resale"...it explains it almost exactly the same as I did.

(sorry unable to paste an excerpt from the doc)

The only misunderstanding perhaps? is that conversion rate is variable, you are protected against downside, but no upside( apart from the 1%), at conversion.

Yes you get dividends, and extra 1% by way of discount at the end.

Pls correct me if I am wrong or have misundestood

I will probably buy some, but havent read the prospectus fully yet, so perhaps it is me that has got the wrong end of the pineapple

 

[Bill M]

Wysiwyg, awg is right I think. My understanding is that you will get a 1% discount on your ANZ shares at conversion. Put the ANZ share price to one side and just think about it like this.

At conversion your Face will value will be $101.01 (not $100 which is what you will pay) per share. They will convert that into ANZ shares at the market price at the time.

This is what part of page 5 says:
-------
The Mandatory Conversion Conditions1 are intended to prevent CPS2 holders from receiving less than $101.01 worth of ordinary shares per CPS2 on conversion2.
2. Based on the average of the daily volume weighted average sale prices of ordinary shares sold on ASX during the 20 business days before the mandatory conversion date. This VWAP may differ from the ordinary share price on or after conversion

-------

For others who are interested there has been a good discussion on these at this link on the ANZ thread. https://www.aussiestockforums.com/forums/showthread.php?p=508753#post508753

 

[alphaman]

100 preference shares for 101 ANZ fpo would hardly be a fair trade off.

Not fair at all, but it's actually $100 of preference shares for $101 of ordinary shares.

 

[Wysiwyg]

Not fair at all, but it's actually $100 of preference shares for $101 of ordinary shares.

Yes that is correct as awg has noted. Thanks