Macquarie Group has warned institutional investors of an impending default in its high-yielding Generator Income Notes after one of its principal portfolio holdings went bankrupt.
Listed Macquarie subsidiary Generator Investments Australia Limited (GIA) issued a statement yesterday saying a default is likely to occur in the coming weeks on the portfolio's 0.35 per cent holding in Canadian publishing giant Quebecor World.
GIA director Craig Swanger said there will be no impact to the income portfolio because Quebecor was only held in the principal investment, which is triple-A rated by Standard & Poor's.
"A portfolio event [default] in this portfolio is unlikely to affect the credit rating as the total protection in the portfolio as at 31 December 2007 was 10.32 per cent, well in excess of the 7.23 per cent required to maintain S&P's credit rating of AAA," Swanger said.
Generator Income Notes are debt instruments that receive their return and risk from the purchase of Aria notes by the underlying manager, Paris-based Axa Investment Managers.
Axa made no change to the principal portfolio over December, Macquarie said yesterday.
Quebecor is the world's second-largest printer.
It is listed on the Canadian and New York Stock Exchanges and has around 28,000 employees in 17 countries.
The company failed to get an extension from its bank lenders to repay part of a US$750 million loan earlier this month.
