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Perpetual Infratil Infrastructure Bond (PiiB)

2 Dec 2007

On 15 November 2007 Infratil set the rate on its PiiBs for the following one year period so as to yield the one year swap rate + 1.5%pa. Infratil determined the rate to be 10.18%pa.

Subsequently it was brought to Infratil’s attention that the definition of “one year swap rate” has two potential interpretations. As the PiiBs pay a quarterly coupon, Infratil determined the rate to be the one year rate for quarterly coupon bonds which it confirmed with ANZ, BNZ and Westpac banks on 15 November 2007.

The alternative interpretation is that the “one year swap rate” should be the rate shown on an interbank Reuters’ screen, even if that rate was for semi annual coupons. On this basis the PiiB’s yield would be 10.27%pa. Notwithstanding that this would represent a windfall benefit to investors who would effectively receive Swap +1.59%pa.

Because of this uncertainty Infratil has been working with its Trustee and the Trustee’s legal advisers to reach a definitive conclusion. It is hoped that this will occur this week.

Infratil’s greatest concern is to comply with both word and spirit of its obligations. As this uncertainty should not be a cost to PiiB holders Infratil will pay the additional 0.09% sum for the coupon period from 15 November 2007 to 15 February 2008. This means that investors will receive the rate of 10.27% for at least the current coupon period. It is hoped that well before the next coupon period starts this uncertainty is entirely resolved.

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