Simplicity is the key
By 2017, the company needed to diversify its capital even more – and was eagerly eyeing the retail investor base. Importantly, Peet decided to issue its first debt capital markets deal under simple corporate bond documentation. “We already had a retail convertible bond on the market and we put a structure in place where you could convert one for the other. It opened up the retail market and made it easier to tap,” says Andrew Gordon, director, debt capital markets at NAB.
A simple corporate bond structure makes it easier for retail investors to access corporate bonds, which typically have been the domain of wholesale and institutional investors. (See below for more information on simple corporate bond structures). Peet was only the second issuer to issue under this regime and the first to tap.
“The simple corporate bonds also allowed Peet to pay down their senior debt, which opened the door to finance some significant joint ventures, and gave the group more headroom to transact on the front end of their business,” explains Gordon.
The response to both the initial transaction and the $50 million tap was strong – the initial deal was launched at $75 million and upsized to $100 million and was oversubscribed by 1.4 times. “Investors liked the bonds because they provide a yield that’s effectively asset-backed by underlying land,” says Gore. “So even though it was unsecured, there was a significant amount of security that supported the bonds.”
Accessing the corporate bond market has been nothing short of transformational for the company: “It’s strengthened our balance sheet and given us a significant increase in the term of our debt, while opening up a new funding source for the company to keep growing,” says Gore.