Investors snap up Macquarie hybrid issue
After last week announcing plans to raise up to $400 million by issuing hybrid shares, Macquarie said on Monday it had received $580 million in commitments from brokers and institutional investors.
Macquarie also increased the maximum offer size to $600 million, and closed the bookbuild early, rather than leaving it open until this Tuesday.
Hybrid shares pay a fixed interest rate, which usually reflects returns on bonds, and eventually convert into ordinary shares.
The assets have been a hit with investors because of their more predictable returns, with big companies raising some $7 billion through hybrid shares last year, and Westpac and NAB each selling more than $1 billion in hybrids this year.
The Macquarie notes will pay a distribution twice a year at the bank bill swap rate plus a margin of 4 per cent - the lower end of the range under consideration.
Macquarie will open an offer to shareholders on Wednesday, but the strong demand means there will be no general retail offer.
While investors have embraced hybrids as a solid source of income during a time of market volatility, the corporate regulator has warned people that the products are often complex and riskier than corporate bonds.
Macquarie shares rose 2.45 per cent, or $1.07, to $45.64.
Frequently Asked Questions about this Article…
Investors snapped up the offer so quickly that Macquarie increased the maximum issue size from an initial plan of up to $400 million to $600 million, closed the bookbuild early, and received $580 million in commitments from brokers and institutional investors.
Hybrid shares pay a fixed-style distribution (similar to bond returns) and, according to the article, eventually convert into ordinary shares. Macquarie's notes will pay distributions twice a year.
Macquarie's hybrids will pay a distribution twice a year at the bank bill swap rate plus a margin of 4%, which was the lower end of the range under consideration.
Macquarie opened an offer to shareholders, but because demand was strong and the bookbuild closed early, there was no general retail offer; most commitments came from brokers and institutional investors.
The article says hybrids have been popular because they offer more predictable returns and act as a solid source of income during market volatility—big companies raised about $7 billion via hybrids last year, and banks like Westpac and NAB sold more than $1 billion each this year.
While hybrids can offer steady income, the corporate regulator has warned they are often more complex and riskier than corporate bonds, so they are not necessarily a low-risk alternative.
Macquarie shares rose 2.45%—an increase of $1.07—to $45.64 following the hybrid offer news.
Closing the bookbuild early and lifting the maximum from $400 million to $600 million indicates strong demand from institutional investors and brokers; it also meant limited availability for general retail investors because the company prioritized those commitments.
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