Bank offers preference shares

The bank is authorised to offer up to R1bn in non-cumulative, non-redeemable and non-participating preference shares.

The preference shares will only be listed on the JSE Securities Exchange.

Investec CEO Stephen Koseff said the shares will yield a semi-annual dividend of 75% of Investec Bank Limited's prime overdraft rate, which is currently 15.5%.

"Currently, using a maximum individual marginal tax rate of 40%, this is equivalent to a pre-tax annual yield of 19.38%," he explained.

The term 'non-redeemable', said Koseff, meant that the preference shares will not be redeemed at any date in the future and they will remain in issue unless there is a winding up of Investec Bank.

"This differs from bonds and certain other preference shares that are redeemed at some agreed date in the future," he explained.

"'Non-cumulative' means that should Investec Bank not declare a preference dividend, the dividend does not carry over to the next dividend period.

"If declared, dividends will be paid out semi-annually at least one week prior to the Investec Limited ordinary dividend payment, and in any event no later than 120 days after 31 March and 30 September each year.

"The preference shareholders do, however, have preferential access to income distribution before ordinary shareholders," he confirmed.

'Non-participating' meant that the preference shareholders' dividend is limited to 75% of Investec Bank's prime overdraft rate on the deemed face value of R100 per preference share, irrespective of the profitability of Investec Bank.

"Investec is responding to strong demand by investors for a low-risk, high yielding, tax efficient, inflation-beating investment vehicle with this issue," said Koseff.

He confirmed that the Registrar of Banks had given his approval for the proceeds from the issue of these shares to qualify as "primary capital" in terms of the Banks Act.

"Investec management believe that this issue will reduce the Bank's cost of capital and further strengthen the financial position of the group," he concluded.