Fletcher Building can expect a large benefit from
declining funding costs when it rolls over $75 million of
capital notes in mid-March, resetting the interest rate down by
At present, the long-term corporate bonds are offering 8.9%,
but will decline by 3.5%, to 5.4% in mid-March, for the new
term until mid-March 2019.
Craigs Investment Partners broker Peter McIntyre said
Fletcher carried about $1.6 billion in ''laddered'' debt,
coming due at different times and its bottom-line would
benefit from paying out less interest. Carrying less debt
would be positive for the share value.
While capital note holders would be offered less interest,
they would consider staying with Fletcher as it remained a
well-capitalised company, and at the lower end of investment
''This shows where interest rates have been driven - and they
could go lower,'' Mr Mcintyre said.
Fletcher has this week passed the $1 billion mark on repairs
completed in Christchurch, where it is the lead contractor
for the rebuilding, with a total 31,000 jobs in the pipeline.
Mr McIntyre noted that at a time when Fletcher shares were
under duress in 2009, institutions and small shareholders
took up a total $605 million placement. Fletcher shares have
traded up almost 60% since July and have been trading around
$9.20, slightly off last week's high of almost $9.30.
Fletcher has exercised an option to pay cash for the capital
notes, as opposed to repaying them in ordinary shares. Note
holders have until February 26 to decide on taking up the new
term, or have some, or all notes paid out in cash.