Lack of clarity in ALE subordination 12 April 2010 4:35PM Philip Bayley ALE Property Group is currently offering its ALE Notes 2 to retail investors. As previously reported, this will be the first retail bond issue for the year. While the issue is already almost oversubscribed at the oversubscription amount of A$150 million, the issue has attracted some criticism. The ALE Notes 2 are subordinated securities but it has been alleged that this is less than clear from reading the prospectus -which is a full prospectus - as the new rules have yet to be introduced. Moreover, the subordination comes from structural considerations within ALE Property Group. This is unlikely to be a feature that most retail investors would understand and therefore would be overlooked. If these bonds had been rated, the rating agency would have highlighted this feature. As it is, investors' compensation for buying the unrated, 4.5-year bonds is a coupon of 400 basis points over bank bills. In the absence of retail credit ratings, it would seem that ASIC has an obligation to vet prospectuses carefully to ensure that investors aren't being misled or confused. This will be even more critical when short-form prospectuses are being used.