Money at Work: Tower Capital fixed rate unsecured bonds

What is it called and what sort of savings product is it?
TOWER Capital Fixed Rate Unsecured Bonds.

Who is the company behind it?
TOWER Capital is part of the NZX-listed life insurer and funds manager TOWER. It is seeking to raise $100 million through this offer to replace bank debt.

TOWER, which was established in 1869, describes itself as "New Zealand's longest-standing insurance and investment organisation".

The company has an investment grade issuer credit rating of BBB- from AM Best Company.

Who is the target market?
Income hungry investors who don't want to accept the low term deposit rates offered by banks.

What return does it offer?
The bonds are paying 8.50 per cent with four interest payments a year.

When was it launched?
February 16.

What other products is it like or is it competing with?
TOWER's bond is competing with all the others which have been in the market recently and it will go up against one from Contact Energy which opens today.

Is it long term, short term or medium term?
The bonds are for a five-year term maturing on April 15, 2014.

What is the unique selling point?
Of all the bonds in the market currently (or recently) these have the highest interest rate. Depositrates.co.nz has done a comparison table of recent offers here.

How strong a stomach do you need for it?
While many of the other bond offers have had ratings this one doesn't. As it is unrated, and the company is smaller than others in the market it carries a little more risk, hence the higher interest rate.

What's the hitch?
Some argue that the interest rate is a little too low, however investors don't seem to be put off as demand has been reported to be high.

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