NAB subordinated Notes

[Francesco]

NAB Subordinated Notes are:
• Interest bearing notes that constitute direct, subordinated and unsecured obligations of NAB
• Directly issued by NAB
• Earn a floating rate of interest equal to the sum of the Bank Bill Rate plus a Margin of 2.75% (for example, based on the 90 Day Bank Bill Rate as at Friday 18 May 2012 of 3.64%, the floating interest rate would be 6.39% per annum)
• Term of 10 years (NAB has certain rights to redeem earlier, subject to regulatory approval, which may not be granted)
• ASX Listed - it is expected that the NAB Subordinated Notes will be listed on the Australian Securities Exchange under the code "NABHB"
• Interest calculated and paid quarterly
• Minimum investment of $5,000

Offer closes 8 June 2012


What do investors think of this investment option. Surely, NAB will be there and this investment will be reasonably secure?

 

[coolcup69]

So it's 6.4%, no franking credits and is subordinated, so ranks just above equity. NAB will be around but these instruments have a massive step down in yield relative to the bank's ordinary shares without that big a step down in risk. You are still subordinated in these notes yet they price at about 500bps lower than the grossed up yield of the ordinary equity. Doesn't make sense to me, they are chasing dumb retail yield monkeys attracted by the "brand".

 

[Shaneelastic]

pass............why would i buy these, when i get get better dividend yield on nab shares, + franking credits

 

[coolcup69]

I'll also add that term deposits rank above these in the capital structure and their yield is fixed not floating (like these notes) in an environment where the yield curve is going down... The 90 day bill rate today is 3.4%

 

[alexlee]

The note will be listed, but they are likely to be fairly illiquid. As opposed to a high interest bank account or NAB shares, which would be much more liquid (though more volatile).

 

[Francesco]

So it's 6.4%, no franking credits and is subordinated, so ranks just above equity. NAB will be around but these instruments have a massive step down in yield relative to the bank's ordinary shares without that big a step down in risk. You are still subordinated in these notes yet they price at about 500bps lower than the grossed up yield of the ordinary equity. Doesn't make sense to me, they are chasing dumb retail yield monkeys attracted by the "brand".

Thanks for the responses so far.

Equity should be more volative than interest rates. However, I believe fund manager of fixed interest and bond securities can achieve consistently better return with great lidiquity.

I am giving this NAB offering a miss.