Colonial First State share fund short term notes rated A-1
29 August 2002
Colonial First State today announced the establishment of a $750 million short term note programme1 for its Wholesale Geared Share Fund.
Additionally, Standard & Poor’s has confirmed the programme will carry a short term debt rating of A-1.
It is the first time, in the Australian financial services industry, that both the debt of an Australian equity fund has been rated and an Australian equity fund has established a short term note programme.
The Colonial First State Geared Share Fund borrows money to supplement client investments in blue chip Australian companies which form part of the S&P/ASX 100 Index. Over time, the rating will reduce the cost of debt for the fund, improve borrowing capacity and deliver increased returns to investors.
John Pearce, General Manager, Investments, said the programme will complement direct loans and help finance the ongoing growth of the Geared Share Fund which has returned more than 20 per cent pa since inception in August 1997.
"On top of the fund’s excellent track record Colonial First State has a distinct advantage over similar gearing instruments in the market because we can reduce the cost of borrowing which is passed onto investors.
"We’re very pleased with the Standard & Poor’s rating of A-1. It highlights the quality of the debt which is based on a conservative gearing policy, rigorous stock selection process and tight liquidity controls of the fund."
The Geared Share Fund already carries debt of about $1 billion from twelve major lenders and has total assets of approximately $2 billion giving a gearing ratio of approximately 50 per cent.
The Geared Share Fund has returned 22.9 per cent pa in the period to June 2002, outperforming the ASX 100 Index by 14.01 per cent pa.
The short term notes are expected to be issued in early September 2002.
Commonwealth Bank of Australia is the Arranger, while ANZ and Commonwealth Bank are Dealers on the Programme.