Insurer and banking services provider Suncorp Group Ltd (ASX: SUN) is raising capital for proceeds that it expects to use for funding one or more of its regulated entities' capital requirements. It will do this through a convertible preference share (CPS) offer.
Issue price and minimum investment
The issue price for these convertible preference shares, referred to as CPS3, will be $100 each. The minimum investment is $5,000. CPS3 holders will receive dividend payments quarterly, starting on 17 June 2014.
Dividend calculation and payment period
The dividend payment will be based on the 90-day bank bill swap rate (BBSW) plus a 3.40% per annum margin rate, which was set in the bookbuild completed 1 April. The bank bill rate on the first business day of the relevant dividend period will be used for calculation. Dividends will be adjusted for Suncorp's tax rate.
CPS3 exchange and conversion
The CPS3 have no fixed maturity date. Suncorp may elect to exchange all or some CPS3 on the optional exchange date set for 17 June 2020. All CPS3 not exchanged by Suncorp earlier will be converted mandatorily into ordinary shares of Suncorp on 17 June 2022, subject to certain conditions.
Opening date for the securityholder offer
Suncorp securityholders will have the opportunity to apply for CPS3 when the offer opens on 8 April 2014. The closing date for the securityholder offer is 30 April 2014.
Issue and trading commencement dates
The issue date will be 8 May 2014 and the CPS3 will commence trading on a deferred settlement basis on 9 May 2014. Suncorp will apply for CPS3 to be quoted on ASX under ASX code "SUNPE"
Foolish takeaway
Suncorp is recovering from claims caused by abnormally large amounts of damage due to natural disasters several years ago. It is also improving its banking division and has about $1.2 billion in capital in excess of its conservative operating targets.
During this time of restructuring and balance sheet strengthening, the stock may offer a buying opportunity for long-term investors.
