Aged-care operator eyes retail investors

Listed retirement village operator and aged-care provider Summerset Group Holdings has launched a $100 million bond offer to ‘‘mum and dad’’ investors.

Summerset chief executive Julian Cook said the company had received firm indications from brokers that there was sufficient appetite from investors for the issue, plus another $25m worth.

As with most bond offers, they are secured by mortgages over the issuing company’s assets.

Bondholders will rank behind creditors but ahead of shareholders, who generally have few if any rights in the event of company collapse.

The investment statement spells out clearly the possibility of total loss. However, analysts consider Summerset among the leaders in the sector.

Investors will have to go through their own brokers or enlist with one to subscribe.

Summerset is offering an interest rate of 4.78 per cent and will pay back the bonds after a six-year term.

This is higher than mainstream bank five-year term interest rates, which are currently up to about 4.3 per cent.

Cook said the bond issue was the first for Summerset and the first for the aged-care sector.

It allowed Summerset to diversify its borrowing over different time periods, and would allow the company to reduce its bank funding from $300m to $211m.

Cook said that if things changed quickly in the market a company could have problems refinancing, which might interrupt development programmes.

The bonds complement existing syndicated loan facilities that were refinanced in March.

Summerset intends to quote these bonds on the New Zealand stock exchange’s debt market, which means they may be sold before the end of their term if there are interested buyers.

The price sellers would obtain would vary depending on the financial condition of Summerset Group and movements in market interest rates.

Summerset is one of New Zealand’s largest retirement village and aged-care developers and operators. It owns 21 retirement villages and has plans to continue building additional villages.

Lead brokers for the latest bond offer are ANZ, Deutsche Craigs, First NZ Capital Securities and Forsyth Barr.