ASB borrows $400 mln at 6.65% in 'complex' 10-year debt issue

ASB has issued $400 million worth of subordinated, unsecured debt securities that'll pay investors annual interest of 6.65% for five years.

The $400 million is the upper end of what the bank was seeking to borrow, with the offer touted as being for $300 million worth of $1 debt securities plus up to $100 million of oversubscriptions.

"The offer raises Tier 2 Capital to satisfy ASB Bank Limited's and (parent) Commonwealth Bank of Australia's regulatory capital requirements and maintain the diversity of ASB Bank Limited's and Commonwealth Bank of Australia's sources and types of capital funding," ASB says.

The offer of 10-year subordinated and unsecured debt has been described as "complex" by the Financial Markets Authority, which said the ASB securities might not be suitable for many investors.

The interest rate reflects a margin of 2.05% per annum over the five year swap rate of 4.60% on March 24. This interest rate applies until a potential call date on June 15, 2019. ASB says the interest rate will be reset on the call option date, assuming the notes aren't called and repaid, with the reset done at the same 2.05% margin. Interest will be paid quarterly in arrears.

The maturity date is June 15, 2024.

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Forgive my ignorance but what would the difference be between this and the "toxic waste" sold pre GFC in the US?