ABN to help investors into market

The buy now, pay later shopping experience is set to extend to shares in 15 of the stock exchange's largest companies.

In the same way investors can pay a deposit, borrow the rest of the money, buy a house and use the rental income to service the loan, ABN Amro is launching a scheme to help retail investors buy shares.

Known as "rolling instalment warrants", it means investors make an initial payment of about half the price of a share plus pre-paid interest for the next 18 months on the balance, and a capital protection and borrowing fee to ABN Amro.

ABN buys the shares and puts them in trust for the investor who then receives all dividends and imputation credits.

A second and final payment can be made at any time - it is the balance of the amount borrowed.

But, as the "rolling" name suggests - the loan and its terms can be reset every 18 months if the investor chooses to pay another interest instalment and defer repaying the loan capital.

If the share price falls below the level at which it was bought, the investor can walk away, losing only the first payment.

ABN warrant sales director Aaron Milne said benefits for the investor included an enhanced yield (because they get the full dividend for half the capital), tax efficiency (the interest and borrowing fees paid are tax deductible) and diversification (investors can spread their money across more stocks).

Acknowledging that issuing warrants a year ago (when the NZX was on a strong upward path) would have made selling them easier, he said ABN did not have a goal for the amount they wanted to issue but that a $50 million loan book in a year would be good.

ABN Amro chief executive Simon Allen said the scheme was a sign of ABN's commitment to the New Zealand market.

"The launch marks a maturing market where investors expect easier access to a wider range of products to diversity and enhance performance of their existing equity holdings," he said.

"We believe there is significant potential for a strong market demand."

The firm's local equities business has consistently remained a top three performer during the past decade.

Allen said the aim was to replicate the success of warrants in Australia where ABN was the second largest issuer - with A$180 million ($193 million) turnover a month last year. NZX markets development manager Geoff Brown welcomed the warrant news saying they gave investors an "excellent opportunity" to lever their returns.

 

Warrants - which will be listed and tradeable on the NZX - will be issued for shares in Auckland International Airport, Air New Zealand, Carter Holt Harvey, Contact Energy, Fletcher Building, Fisher & Paykel Appliances, Fisher & Paykel Healthcare, Infratil, NGC, Port of Tauranga, Sky City, Telecom, Waste Management, The Warehouse and Westpac.

Sharing it about

* Investors pay about half the share price (plus fees and interest) up front.
* Shares are bought and held in trust by ABN Amro and investors get all dividends.
* Investors can complete payment and fully own shares at any time.
* Investors can keep paying interest and roll the warrant over every 18 months.

www.abnamro.co.nz/warrants