Non-Underwritten $267M Capital Raise Poses Subscription Risk for PCI Investors

Capital Raising Details

Perpetual Credit Income Trust (PCI), a listed credit and fixed income investment trust, has announced a significant capital raising initiative through a pro-rata non-renounceable entitlement offer and a shortfall offer. The trust aims to raise approximately AUD 267 million by issuing new units at $1.10 each, which represents a 9.1% discount to PCI's closing price on 7 November 2025. Eligible unitholders can subscribe for one new unit for every two units they currently hold, with the option to apply for additional units through a top-up facility.

The offer is not underwritten, introducing some subscription risk, but is supported by a syndicate of joint lead managers including Commonwealth Securities, Ord Minnett, Morgans Financial, E&P Capital, and National Australia Bank. The proceeds will be deployed to pursue new investments aligned with PCI's credit and fixed income strategy.

Portfolio and Investment Strategy

PCI's portfolio is well diversified across approximately 160 holdings spanning 94 issuers, with a focus on Australian corporate credit. The trust primarily invests in senior secured debt instruments with a floating rate and short duration profile to mitigate interest rate risk. The portfolio includes a mix of investment grade and sub-investment grade assets, with nearly half of the holdings unrated but carefully selected through rigorous credit research.

Management highlights a strong pipeline of corporate loan and securitised asset opportunities, supported by stable credit market conditions and an attractive yield environment relative to other asset classes. The trust targets a total return of the Reserve Bank of Australia cash rate plus 3.25% per annum, net of fees, aiming to provide monthly income distributions to investors.

Risks and Market Outlook

The announcement includes comprehensive disclosures on risks inherent to PCI's investment strategy, including credit risk, liquidity risk, operational risk, and market volatility. The trust does not employ leverage at the fund level, though derivatives may be used for hedging purposes within a 15% leverage limit. Investors are reminded that distributions are discretionary and not guaranteed.

Market conditions remain stable with elevated base rates and government bond yields near decade highs, which underpin PCI's yield profile. The trust's management team, with decades of combined experience, emphasizes a disciplined investment process and transparency in valuations.

Implications for Investors

The capital raising is expected to increase PCI's scale and liquidity, potentially benefiting existing unitholders through reduced per-unit expenses and enhanced market interest. New units issued will rank equally with existing units and be eligible for upcoming distributions, including the December 2025 distribution. The offer price reflects a discount to market, providing an incentive for participation without brokerage costs.

Investors should consider the offer in the context of PCI's long-term investment horizon and the risks outlined. The trust's defensive asset profile and stable net tangible asset value have supported unit price performance despite recent market volatility.