Investors like MCIs

John Kavanagh

Australian Unity’s mutual capital instrument, the first security of its kind, has been a hit with investors, trading at a premium to its issue price since listing on the ASX last month.

After listing on January 4 with a face value of A$100 per security, Australian Unity MCIs have traded consistently above their issue price and closed at $107 on Friday.

The securities have a fixed dividend rate of 5 per cent. Australian Unity expects to pay fully franked dividends and with franking credits the yield will be grossed up to 7.1 per cent. Dividends are discretionary and non-cumulative.

In 2019, the government amended the Corporations Act, defining mutual entities in the legislation for the first time and permitting mutual entities registered under the Act to issue equity capital without jeopardising their mutual status.

The new law was created in response to the Hammond Report in 2017, which provided advice to the government on how to reduce barriers to enable co-operatives and mutuals to “invest, innovate, grow and compete”.

The Australian Unity securities are perpetual, fully paid mutual capital instruments, with no set call date or maturity. They will sit in the capital structure as preferred equity, ahead of ordinary equity but below subordinated and unsecured debt.

Australian Unity has built up an investor base for high-yield securities over the years, with issues of corporate bonds and retirement village investment notes.