Money at Work: AMP Notes

What is it called and what sort of savings product is it?
AMP Notes are listed debt securities.

Who is the company behind it?
AMP Notes are being issued by AMP Group Finance Services. The notes will be available in New Zealand and Australian dollar denominations. AMP is a well-capitalised financial services company and says it held A$898 million of capital in excess of minimum regulatory requirements (MRR) as at December 31.

The company this week won the Morningstar Fund Manager of the Year award.

Who is the target market?
Investors wanting an income bearing investment other than a term deposit, finance company debenture or managed fund.

What return does it offer?
Currently AMP is going through a book build process and the rate will be set after that. It will be based on a margin over the five-year swap rate and it is expected the rate on NZ dollar notes will be between 8.40 per cent and 8.90 per cent.

When was it launched?
March 3 and applications close on April 4.

What other products is it like or is it competing with?
It seems each week there is a new corporate bond offer in the market as companies seek to replace funding formerly provided by the banks. A full list and details of offers can be seen here.

Is it long term, short term or medium term?
This is a 10-year note, however AMP has included in it an option to redeem the investments in five years.

What is the unique selling point?
One of the good things about this offer, compared to others, is that AMP has provided a good level of information including a prospectus and investor presentation. Other competing offers have had less information available.

How strong a stomach do you need for it?
The AMP Notes have been provisionally rated A- by Standard & Poor's and A3 by Moody's.

What's the hitch?
A hitch with all these corporate bonds is that there is the possibility that investors could make capital losses on their holdings. While most offers are tradable on the secondary market there is no guarantee that any bonds sold before maturity will change hands at face value (or more). Indeed some of the bonds sold over the past year can now be bought on the market for less than par.

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