Don’t gamble on Crown Subordinated Notes II

James Packer’s Crown Resorts (ASX: CWN) has announced a $600m Subordinated Notes II (‘Notes II’) hybrid issue, joining the big banks in taking advantage of historically low interest rates to raise cheap capital. But as with Crown’s pokie machines, the terms of Notes II are weighted in the company’s favour. Paying a 4% margin above the bank bill rate, Notes II compare favourably to term deposit rates and recent bank hybrid offers. ANZ’s (ASX: ANZ) Capital Notes 3 pays 3.6% while NAB’s (ASX: NAB) Capital Notes offers 3.5%. The comparative attractiveness explains why Crown’s offer was quickly increased from its original target of raising $400m to $600m. So in that sense this rather negative review has already been outdone by market demand for the offer. But we’ll plough on regardless, making the point that only in the exceptional environment of a post-GFC world could offers like this be possible. Investors are giving away a great deal in return for modest, fixed returns. (VIEW LINK)