Insignia to pay NAB extra $53.5m on loan notes

The news: Takeover target Insignia Financial has outlined additional costs in relation to subordinated loan notes (SLN) issued to National Australia Bank.

The numbers: The wealth manager said it will pay additional returns of $53.5 million to NAB in relation to the $200 million SLN debt, after it declined the lender’s early redemption request. Of this, $37.7 million has already been recognised as a derivative financial liability in the half-year accounts released last month.

The remaining $15.8 million adjustment will be recognised in the second-half accounts, Insignia said.

The context: Insignia, formerly called IOOF, said it issued the SLNs to NAB in May 2021 as part of the funding package to finance its $1.44 billion acquisition of MLC Wealth. Under the deal, the SLN’s had an equity-linked component under which an additional return was payable if the average price of Insignia shares during a certain period prior to the redemption request exceeded the reference price, with the coupon rate rising from 1% to 4%.