Odd happenings with SFF Bonds

The best offer to buy the bonds is apparently at an 12.5% annual interest rate even though the bonds carry a 10.25% coupon.

Logic suggests getting one's money back a few weeks early by selling on market should require a discount to the repayment price and the fact of the early redemption should have boosted confidence in the bonds, pushing down the yield.

Silver Fern Farms is repaying the bonds early because a marked improvement in its balance sheet has allowed it to renegotiate its banking facilities at more favourable rates. Its banking syndicate involved Rabobank, HSBC, Westpac and CBA.

Its equity ratio at September 30 was about 70% with debt of about $118 million compared with a 52% equity ratio and $183 million of debt a year earlier.