Customers are seen at a Westpac Bank in the central business district of Sydney. — AFP
SYDNEY: Westpac Banking Corp, Australia’s third-largest bank by market capitalisation, says it will raise A$750mil (US$488mil) in an Additional Tier-1 (AT1) capital transaction.
The notes will be issued at A$100 each and potential investors have been told the interest margin is between 3.10% and 3.3%, according to a Westpac statement.
The final margin will be set during a book-build which will run for a week from yesterday and the bank has the option to increase or decrease the size of the offer.
The Australian Prudential Regulation Authority (APRA) said in September it would review the rules around AT1 bonds, which were impacted by the collapse of Credit Suisse in March, to determine they were still fit for purpose.
The AT1 bonds are used by banks to stabilise cash flow in periods of stress, according to APRA.
The bonds became an object of concern to the global financial sector when Switzerland’s financial regulator wrote down 16 billion Swiss francs (US$17.8bil) worth of Credit Suisse AT1s following its failure this year.
Under that deal, holders of Credit Suisse AT1 bonds received nothing, while shareholders, who usually rank below bondholders in terms of who gets paid when a bank or company collapses, received US$3.23bil.
Australia’s assistant Treasurer Stephen Jones said earlier this year Australian law would not allow AT1 bond holders to be wiped out if a bank collapsed in order for equity holders to receive a return.
Commonwealth Bank, Australia’s largest by market capitalisation, raised A$1.55bil in May in AT1 bonds which was the first issuance of the bonds by an Australian bank following the Credit Suisse crisis. — Reuters
