FCLPA will be redeemed or converted when FCL thinks bbsw plus 4.7% margin is expensive funding. This may be a few years away and would be when credit crisis is well and truly over.
I make certain assumptions about timing but, provided so-called running yield is attractive, I think the hybrid is worth investing in:
eg. Assuming 3.5% bbsw, I calculate as follows:
- cash redemption June 2012 gives yield of 67.7% per annum - cash redemption June 2013 gives yield of 56.0% per annum - cash redemtpion June 2014 gives yield of 48.9% per annum - cash redemption June 2015 gives yield of 44.1% per annum - cash redemption June 2016 gives yield of 40.6% per annum
In meantime, running yield is 20.8% per annum or 17.5% over bank bills.
FCL Price at posting:
38.0¢ Sentiment: ST Buy Disclosure: Held
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