New hybrid share listings from Westpac
(31 January 2013 – Australia) Westpac Bank has outlined plans to raise A$500 million with a fresh issue of hybrid shares from investors for the notes that are due to convert to ordinary shares within eight years.
Westpac’s issue kicks off this year’s round of hybrid share listings, after a string of issues last year by large companies saw more than A$7 billion sold to investors.
The Westpac Capital Notes are fully paid, non-cumulative, convertible and redeemable and to be listed on the ASX.
However the notes are subordinated to other forms of debt and unsecured, the notes also qualify as tier one capital under new banking rules known as Basel III.
Hybrid shares pay a set interest rate, which usually tracks the price of debt and after a set period convert into ordinary shares.
Given they have bond-like features, paying a predictable yield, this makes them attractive to retail investors in times choppy markets.
The notes will provide investors with a quarterly distribution rate calculated as the 90-day Bank Bill Rate plus a fixed margin, together multiplied the tax rate, this margin is expected to be between 3.2 percent and 3.4 percent.
Westpac’s chief financial officer, Phil Coffey said: ‘‘The issue will further strengthen Westpac’s Tier 1 Capital position. An issue of A$500 million would add approximately 16 basis points to Tier 1 Capital."
The bank has A$1.04 billion of hybrid notes due to be redeemed in September this year and $910 million of hybrid notes due to be redeemed in September, 2014.
The Westpac Capital Notes are fully paid, non-cumulative, convertible and redeemable and to be listed on the ASX.
However the notes are subordinated to other forms of debt and unsecured, the notes also qualify as tier one capital under new banking rules known as Basel III.
Hybrid shares pay a set interest rate, which usually tracks the price of debt and after a set period convert into ordinary shares.
Given they have bond-like features, paying a predictable yield, this makes them attractive to retail investors in times choppy markets.
The notes will provide investors with a quarterly distribution rate calculated as the 90-day Bank Bill Rate plus a fixed margin, together multiplied the tax rate, this margin is expected to be between 3.2 percent and 3.4 percent.
Westpac’s chief financial officer, Phil Coffey said: ‘‘The issue will further strengthen Westpac’s Tier 1 Capital position. An issue of A$500 million would add approximately 16 basis points to Tier 1 Capital."
The bank has A$1.04 billion of hybrid notes due to be redeemed in September this year and $910 million of hybrid notes due to be redeemed in September, 2014.
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