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I am considering this investment for my SMSF – new issue, Australian Unity Bonds – Series B. (Prospective ASX Code: AYUH).
Would appreciate your views on it. Also, I am new to this sort of investment and was wondering if, at the end of the term, you just get your capital back?
A: Thanks for the question on the Australian Unity Bonds (Series 2, Tranche 1) issue.
These are effectively floating rate notes that mature in 5 years’ time and will pay interest at a margin of 2.8% over the 90 day bank bill.
They are not subordinated – but they are also unsecured debt obligations. There is, however, no higher ranking securities and also a negative pledge not to issue any higher ranking securities.
Will you get your capital back? Australian ratings has assigned Australian Unity a BBB+ rating, which means: a Credit Rating of BBB+ represents a moderate degree of creditworthiness with adequate credit attributes. A BBB+ rating represents a good capacity to meet financial obligations in a timely manner.
No one has a crystal ball, however I would say that you should have a reasonable degree of confidence that you will get your money back. As always, diversification is the name of the game to minimize specific risk.
