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PINs drop interest payment

-David Chaplin

Thursday 4th October 2007

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David Chaplin
Absolute Capital looks likely to miss due interest payments on its NZDX-listed PINs securities.

In an announcement to the NZX this morning, Deon Joubert, Absolute head, said an "Interest Retention Event is likely to occur" for both the PINs A and B series.

"Confirmation of the interest retention from the protection provider is expected in the couple of days," Joubert said in the NZX announcement.

"The recent mark to market moves over the last few months within credit markets has led to deterioration in valuations of the underlying assets, which in turn affects the Portfolio Notes ability to make the immediate interest payment."

However, he said the capital protection element of the PINs securities was unaffected by the latest event and missed payments should be made up as the investments mature.

In a document put up on the PINs website last night, Absolute Capital said the bonus coupon rate the manager would receive ranks behind deferred interest to be paid to investors on maturity.

Absolute also said it was "initiating several underlying manager changes as well as deleveraging the portfolio".

"Absolute continues to assess new potential funds to include in the portfolio with a particular emphasis on how their strategy held up during the last few months."

In the note to investors Absolute said its PINs A notes had outperformed the B series because the latter was more highly leveraged and had a greater exposure to the "credit based strategies" that have been under pressure since the US sub-prime market began to fall apart in June.

Leverage on PINs B is currently at 80% and 25% on the A series. Absolute said it was reducing borrowing in both products.

The latest news came after the NZX put a trading halt on PINs after the manager was late to supply its annual report. Before the trading halt over 40,000 units in PINs B changed hands - 30,000 on September 27 at $85 and 11 at $80 on October 1. No trades occurred in the A series.

The trading halt was due to be lifted after Absolute's announcement to the NZX this morning.

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