SYDNEY: Commonwealth Bank of Australia <CBA.AX>, the country’s biggest mortgage lender, said on Monday it would raise around A$750 million ($574 million) in hybrid securities to refinance a similar issue and fund the group’s operations. The issue, to be listed under the name of PERLS IX on the Australian Stock Exchange, consists of perpetual notes with a mandatory exchange date of March 31, 2024, according to the prospectus. The borrower can also call the notes in March 2022. Price guidance is 390 basis points to 410 basis points over the bank bill swap rate, according to the prospectus.
An investor looking at the issue said he expected the offer to be increased to around A$1 billion. He asked not to be named because he is not allowed to speak to the media. The final margin will be set on Feb. 28 following a bookbuild, with issuance on March 31. Trading on the ASX will start on April 5. Financial regulators require banks to hold certain amounts of these securities to ensure they have sufficient capital to avoid the need for a taxpayer-funded bailout in the event of a financial crisis, as happened in many countries in 2008/09. Banks issue subordinated debt and hybrids, a mix of debt and equity, because they are cheaper to issue than shares. The CBA issue follows plans for an A$800 million debt sale by National Australia Bank <NAB.AX>. CBA and Morgan Stanley are joint arrangers and joint lead managers on the offer. Other joint lead managers include Evans and Partners, JPMorgan, Morgans Financial, National Australia Bank and Westpac Institutional Bank.
