Insignia Financial (ASX: IFL), a leading Australian wealth manager providing financial advice, superannuation, and asset management services, has rejected National Australia Bank’s (NAB) early redemption request for $200 million in subordinated loan notes (SLNs), electing not to exercise early repayment. The request, received on 3 March 2025, was made under the loan agreement terms, which allow NAB to request early redemption from 30 November 2024, though Insignia is not obligated to repay until the SLNs mature on 31 May 2026.
Loan terms and financial implications
The SLNs were originally issued by Insignia Financial to NAB in May 2021 as part of the financing for Insignia’s acquisition of MLC Wealth from NAB. Under the agreement:
- If early redemption is declined, the coupon rate increases from 1% to 4% starting 1 March 2025.
- An Additional Return Amount (ARA) of $53.5 million is payable at maturity, as the 30-day volume-weighted average price (VWAP) of Insignia shares as of 28 February 2025 ($4.50) exceeded the reference price of $3.55.
- The 4% interest applies to both the $200 million principal and the ARA.
Accounting treatment and financial reporting
Insignia recognised a derivative financial liability of $37.7 million related to the ARA as of 31 December 2024. The remaining $15.8 million fair value adjustment will be recognised in Insignia’s profit & loss for 2H25 but will be excluded from underlying net profit after tax (UNPAT). Both the SLN and ARA will be treated as current liabilities at 30 June 2025.
