ANZ Bank New Zealand says it's going to borrow $500 million through a capital notes issue that'll pay investors 7.20% per annum.
That interest rate will be paid up until May 25, 2020 on the mandatory convertible, non-cumulative, perpetual, subordinated, and unsecured notes. Interest will be paid quarterly.
The notes have no fixed maturity date, and remain on issue indefinitely if not repaid, converted or written off. They have an "optional exchange date of May 25, 2020, and a "mandatory conversion date" of May 25, 2022.
As reported last month ANZ was seeking to raise at least $250 million, with the offer open to oversubscriptions. The bank says due to strong demand, it's taking $250 million worth of oversubscriptions.
"The margin has been set at 3.50% per annum (over swap), giving a fixed interest rate until the optional exchange date of 7.20% per annum," ANZ says.
"All of the notes have been allocated to intermediaries on a firm basis for distribution to their clients and there will be no public pool available. New Zealand investors seeking an allocation of the Notes should contact their financial adviser, or any of the joint lead managers."
The notes have received a BBB- credit rating from Standard & Poor’s, which is the firm's lowest investment grade rating. The notes will be treated as tier 1 regulatory capital for ANZ with funds raised treated as part of ANZ's capital management.
The offer opens today (Friday) and closes on Friday, 27 March 2015 at 5pm.
"The notes are mandatory convertible, non-cumulative, perpetual, subordinated, and unsecured. Depending on the circumstances, the notes may be repaid, converted into shares in Australia and New Zealand Banking Group Limited (ANZBGL) or written off. The notes will not be guaranteed by any person, and ANZBGL does not guarantee ANZ," says ANZ. Here's the indicative terms sheet.
Westpac also raises NZ$500 mln
Separately Westpac today borrowed NZ$500 million through a three-year floating rate medium term note issue. The Westpac notes were priced at a margin of 50 basis points over the 90 day bank bill rate giving an interest rate of 4.13%.
Sold to local institutional investors, the Westpac notes have AA- (S&P and Fitch) and Aa3 (Moody's) credit ratings. The senior, unsecured and unsubordinated Westpac notes will be issued on March 16 and will mature on March 16, 2018. Interest will be paid quarterly in arrears.
8 Comments
It makes Harmoney look attractive, at least you get a better interest rate from harmoney for unsecured debt locked in for 5 years. How you get a non junk rating for fully unsecured debt is a bit beyond me.
Why are they so desperate for cash that they will borrow for more then they are actually lending for? Because they are short of collateral. I'm open to other interpretations, but if they can raise cheaper funds backed by collateral why aren't they doing it?
The notes will not be guaranteed by any person, and ANZ Banking Group Ltd does not guarantee ANZ," the bank says.
Therein lies the rub - domestic depositors have the same unsecured exposure and yet are deemed not worthy enough to be in receipt of a 7% return, consistent with what professionals believe is a fair return for equity like bank funding. OBR presupposes depositors' savings will be written off just like any other unsecured creditor. Wake up regulators and enforce a fair deal for those charged with the ultimate responsibility of underwriting domestic banks while protected covered bond creditors and foreign wholesales lenders can walk away intact. Read more
and potentially 100% loss?
"Depending on the circumstances, the notes may be repaid, converted into shares in Australia and New Zealand Banking Group Limited (ANZBGL) or written off. The notes will not be guaranteed by any person, and ANZBGL does not guarantee ANZ," says ANZ."
fairly typical corporate bond? So you capital could get converted to company shares which you have to then sell possibly into a declining market?
"written off" means 100% loss to you?
So at 7.2% plus bank margin of 2% means someone is borrowing at 9%+?
...it will be over-subscribed by a world awash with newly created / printed money
Only by entities such as banks, individuals and pension funds normally have to cash out for annuity payment reasons - you will have noted these securities are deemed perpetual.
Japanese investors who love New Zealand , and who have negative yields in Japan
Not quite - but if you had been investing in 10 yr JGBs over the last 5 years you would have drowned in dosh as yields collapsed from 150 to 19.5 bps - just one of the many, recent mother lodes enjoyed by global bond investors.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.