By Scott Murdoch
SYDNEY (Reuters) – Westpac Banking Corp, Australia’s third largest financial institution by market capitalisation, stated on Monday it could increase A$750 million ($488.1 million) in an Further Tier 1 (AT1) capital transaction.
The notes will probably be issued at $A100 every and potential buyers have been instructed the interst margin be between 3.10% and three.3%, in response to a Westpac assertion.
The ultimate margin will probably be set throughout a bookbuild which can run for every week from Monday and the financial institution has the choice to extend or lower the scale of the provide.
Australia’s prudential regulator stated in September it could assessment the foundations round AT1 bonds, which have been impacted by the collapse of Credit score Suisse in March, to find out they have been nonetheless match for function.
The AT1 bonds are utilized by banks to stabilise cashflow in durations of stress, in response to APRA.
The bonds turned an object of concern to the worldwide monetary sector when Switzerland’s monetary regulator wrote down 16 billion Swiss francs ($17.8 billion) value of Credit score Suisse AT1s following its failure this yr.
Underneath that deal, holders of Credit score Suisse AT1 bonds obtained nothing, whereas shareholders, who often rank beneath bondholders when it comes to who will get paid when a financial institution or firm collapses, obtained $3.23 billion.
Australia’s assistant Treasurer Stephen Jones stated earlier this yr Australian regulation wouldn’t enable AT1 bond holders to be worn out if a financial institution collapsed to ensure that fairness holders to obtain a return.
Commonwealth Financial institution, Australia’s largest by market capitalisation, raised A$1.55 billion in Could in AT1 bonds which was the primary issuance of the bonds by a home financial institution down beneath following the Credit score Suisse disaster.
($1 = 1.5366 Australian {dollars})
(Reporting by Scott Murdoch in Sydney; Modifying by Muralikumar Anantharaman and Stephen Coates)
