aazpb, page-26

Warford,

Thank you for your post.

I searched ALZ announcements around the 1 Oct 2008 but could not see any regarding AAZPB. I presume ALZ had decided to keep the original terms & conditions in the ASSET prospectus, that is to raise the margin to 4.8% and kept future reset margin at 2.5%

I am not familiar with “current market margin rates” for these hybrids but the recent WBC SPS II was at 3.8%. AAZPB is perpetual. The credit rating difference between ALZ & WBC may justify the 1% margin difference between these 2 hybrids?

Recently there was a big outrage regarding Capitaland’s CEO remuneration which had the highest bonus payment in Singapore (something like in excess of S$21 million from memory) at a time of plunging Capitaland sp and 1/3 of the company’s annual profit was “abnormal” from assets disposal. One of the best run Singapore companies, Singapore airlines CEO’s bonus was a fraction of this guy’s bonus.

With this guy running Capitaland, I don’t see him redeeming all of AAZPB which is a perpetual hybrid. Come 1 Oct 2011 if the new margin of 7.3% (4.8% + 2.5% reset) is more expensive than what ALZ could fund elsewhere, this guy would probably use the “remarketing process” in the AAZPB terms to change the margin rates and to redeem only those AAZPB holders who give the “reset notice response”.

But as stated in my earlier post if I read the “reset process” & “remarketing process” correctly, then at some stage in 1 Oct 2011, 2014 or 2017…. The margin rate will become very expensive. There is a risk (unlikely?) that future hybrid margin rate may rise faster then the AAZPB rate even after resetting and obviously no one can be sure of what ALZ will be in the long term. Unlike some hybrids like the WBC SPS II, AAZPB do not require redeeming in the event of changes to ALZ ownership or business structures.

Having said this buying a $100 AAZPB perpetual note at around $50 means effectively getting a coupon yield of 2x4.85% and the possibility of the notes being redeemed.

How are the yield compare to other hybrids in the market?