Challenger IM LiFTS 1 Notes (ASX: CIMHA)
What are MM's thoughts on Challenger IM LiFTS 1 Notes (ASX: CIMHA)? Tim
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Answer
Hi Tim,
Challenger IM LiFTS 1 Notes (ASX: CIMHA) are listed income securities that provide investors with exposure to a diversified portfolio of private and public credit, delivering floating-rate monthly income with higher risk than traditional bonds. Floating rate notes protect against rising rates, but not against worsening credit conditions. Currently CIMHA is trading on a yield to maturity of 8.53%, taking into consideration running yield + capital gain back to face value. That said, all of the similar sorts of securities in this bucket (DN1, DMNHA, MA1, RAMHA, SPPHA) are all trading on an 8%+ yield to first call.
- The CIMHA has fallen recently due to wider credit spreads and weaker risk sentiment. Smaller moves are also amplified by low liquidity and monthly income payments, making the price action look more pronounced than it is.
CIMHA is a solid income security, however, it’s not a defensive “set and forget” allocation, sitting a notch higher on the risk curve given its underlying private credit exposure. They have a Target Repayment Date of 4 September 2031, and a final maturity date on 6 September 2032. If they are not redeemed on the first target repayment date, the notes continue until the final maturity date, and the margin steps up by 1.00% until maturity. We like this structure, and view challenger as a well-run, sensible issuer. We like these notes that are now trading at a ~4% discount to face value. Be careful on execution, given low liquidity, being sure to use limit orders.
