Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
CWN have advised the ASX that no interest will be paid in March or April. As these Hybrids reside in your Active Income Portfolio (and as I have invested in same) I am interested to hear what you know about the non payment of the interest and your current views as to what outcomes are likely for these hybrids moving forward (bearing in mind the possible CWN buyout) Tony
Hi Tony,
The interest has been deferred as CWN has breached a leverage ratio that stops them from paying it out. The dividend payments accrue and earn interest and will likely be paid at a later date. More broadly, if a change of control event happens such as the completed purchase from Blackstone (which we view as likely), Blackstone have a decision to make. Redeem the Hybrids paying back the face value plus any accrued interest or leave the Hybrids outstanding. If they leave them outstanding, there is a step up in the margin from bank bills + 4% to bank bills + 9% which is very unappealing for Blackstone, an investment grade borrower. Our view as a holder of these securities is that that interest will be deferred until the change of control event occurs, and at that time, the notes will be redeemed and outstanding interest paid.
If the bid falls over, and Blackstone walk the Hybrids should be okay. With the volume of property settlements due this year and next, Crown is likely to be debt free in 2023 making the cost of the Hybrids uneconomic, and redemption would likely occur.
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