A: They are like a bank hybrid security. They are subordinated notes that pay a floating interest rate of 4% over the 90 day bank bill rate. This is currently around 0.1%, so CWNHB is paying about 4.1%. If the 90 day bank bill rate rises to 1%, then CWNHB will pay 5%.

However, the notes don’t mature until 23/4/75 – in about 54 years’ time. Also, from 23/7/21, Crown can call the notes by repaying the $100 face value.  It has the right to do this on every subsequent interest payment (ie every 90 days thereafter). From 23/7/41, if the notes haven’t been called, then the interest rate steps up to 5%.

One further point top note: Crown is not obliged to pay interest and failing to do so is not an event of default. It is, however, then not allowed to pay a dividend on its ordinary shares.

Bottom line – an attractive interest rate, but you could be stuck in this investment indefinitely. From a capital point of view, the stock is trading at $98.45, it is never going to go much over $100. If Crown doesn’t look like it is going to call, or its business or credit quality deteriorates, the price will fall.

I am holding a small quantity of CWNHB from the original issue, and over the 6 years, the stock has traded in an alarming range from circa $105 down to $75. I would be quite happy to exit the investment for $100.