Income Asset Management has supply of an indexed inflation annuity bond, issued by MPC Funding Limited, the financing arm of the Melbourne Convention Centre.
These bonds return principal and interest throughout the life of the bond, so there is no lump sum at maturity. Typically, they are hard to source as investors hold to maturity. If you are interested, even though there may be liquidity, you should also be prepared to hold to maturity.
The Bond
The development of the convention centre was via a Victorian government backed Private Public Partnership (PPP), with the Plenary Group Consortium (PCPL) engaged to design, construct and manage the facilities of the Melbourne Convention Centre. Construction of the centre was completed in 2008 with the official opening in May 2009. The facilities maintenance contract during operations covers cleaning, security, asset maintenance and the management of car parking. In return for providing the contracted services PCPL receives a quarterly service payment from the Victorian state government.
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Key Points
- This is a Senior-Secured ‘public-private partnership’, with funding coming in the form of indexed payments from the Victorian State Government.
- This bond is fully amortising, meaning that each quarterly, inflation-linked payment is a combination of principal and interest, with the final payment coming in late 2033.
- This offers investors an element of inflation protection in an investment grade mature infrastructure asset.
The ultimate return over the life of this issue is dependent on CPI. However, if the RBA is successful in returning inflation to its target band in the coming years and CPI averages 3.5% over the 10 year term to maturity, investors will return 6.75% for a AA (S&P) rated, state government supported infrastructure asset.
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