20 July – 24 July 2015

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Westpac to issue new hybrid
Late last week Westpac was reported to be in the process of issuing another hybrid to add to the other six already listed on the ASX. It is now confirmed the bank will be issuing $750m worth of ”Capital Notes 3” which are non-cumulative, convertible, redeemable, perpetual, unsecured notes, with a margin above BBSW of 400bps to 420bps. The final margin will be set in an institutional bookbuild and the bank may issue more if oversubscribed.

The first call date of 22 March 2021 will be two years before the mandatory conversion date on 22 Mar 2023 and the now-standard non-viability and capital trigger event clauses are present. The issue will boost Westpac’s total tier 1 capital but not specifically satisfy APRA’s new risk weighting requirements due by the 1 July 2016 deadline.

The comments coming out of broking houses is that the issue is likely to be seen favourably by investors due to the historically high margin. The last three hybrids by Westpac were issued at margins to BBSW of 305bps (WBCPE June 2014), 320bps (WBCPD March 2013) and 325bps (WBCPC March 2012). For a comparison with other major bank recent hybrids issue margin see the diagram opposite.

On a cautionary note, one dealer interviewed raised the possibility of this latest issue placing pressure on existing hybrid yields. Previous issues have seen investors sell existing holdings to take up new offers and with more hybrid issues likely in coming months this is something investors should be cognizant of.

yield-hybrids-24july

Tabcorp loses over money laundering
Tabcorp announced Austrac had launched civil proceedings against the casino and wagering company for not informing the regulator of the opening of accounts with false names. The failure could cost the company $17m in fines and, while not insignificant, the amount represents only a little more than 3% of Tabcorp’s operating profits. Tabcorp’s unsecured notes are listed and they showed scant evidence of investor concern with the price of the securities actually increasing on the day the news was made public.

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ASX LISTED HYBRIDS

COMPANYCODEHYBRID
TYPE
MATURITY
OR STEP-UP
DATE
MARGIN
INC FRANK
TRADING
MARGIN
∆ WEEKWEEK
CLOSE
YTM
Est**
S&P CREDIT
RATING
COMP/HYBRID
ANZ Banking GroupANZPAMCPS I16/12/20163.10%2.82%0.14%100.94.96%AA-/BBB
ANZ Banking GroupANZPCMCPS II28/09/20173.10%3.64%0.51%101.015.89%AA-/BBB+
ANZ Banking GroupANZPDMCPS II1/09/20213.40%3.86%-0.07%99.896.11%AA-/BBB+
ANZ Banking GroupANZPECapital Note24/03/20223.25%3.86%0.07%98.556.11%AA-/
Bendigo BankBENHBPerpetual21/10/20541.00%2.62%-0.03%75.154.76%A-/BBB
Bendigo BankBENPDMCPS II13/12/20175.00%3.83%0.18%103.326.08%A-/BBB-
Bendigo BankBENPEMCPS II30/11/20203.20%4.04%0.21%97.016.29%N/A
Bendigo BankBENPFMCPSII15/06/20214.00%4.14%0.04%99.956.39%/BBB-
Bank Of QueenslandBOQPDMCPS II15/04/20185.10%3.29%0.05%106.55.54%BBB+/BB+
CBA PERLS 3PCAPAStep Up6/04/20161.05%2.62%-0.37%198.084.76%AA-/BBB
CBA PERLS 6CBAPCMCPS II15/12/20183.80%3.50%0.22%101.525.64%AA-/BBB-
CBA PERLS 7CBAPDMCPS II15/12/20222.80%3.86%-0.02%94.376.00%AA-/BBB-
ChallengerCGFPACapital Note25/05/20203.40%3.98%-0.27%98.56.12%-/-
EldersELDPAPerp'l Pref30/06/2051N/A0.00%0.00%73.310.00%N/A
IAGIAGPCMCPS II1/05/20174.00%2.83%-0.02%103.355.08%A+/A-
IAG RESIANGReset pref16/12/20194.00%3.13%0.03%1045.27%A+/BBB+
Macquarie BankMBLHBIncome SecPerpetual1.70%3.58%0.02%73.995.72%A/BB+
MacquarieMBLPACapital Note24/03/20213.30%4.09%0.19%98.166.34%A/-
MacquarieMQGPACapital Note7/06/20194.00%3.61%0.03%101.75.86%A-/BBB-
Multiplex SITESMXUPAPerp'l PrefPerpetual3.90%5.29%-0.09%84.27.43%BB+/BB
Nat Aust BankNABHAIncome SecPerpetual1.25%2.96%-0.06%75.125.10%AA-/BBB
Nat Aust BankNABPAMCPS II20/03/20193.20%3.64%0.16%995.78%AA-/BBB-
Nat Aust BankNABPBMCPS II17/12/20203.25%3.75%-0.03%98.255.89%AA-/BBB-
NufarmNFNGStep UpPerpetual3.90%5.31%-0.11%85.617.56%BB /B+
PaperlinxPXUPAPerp'l Pref30/06/2052N/A8.80%0.00%7.411.05%N/A
Ramsay Health CareRHCPAPerp'l PrefPerpetual4.85%4.66%0.00%104.156.91%BBB/BB+
Suncorp-MetwaySBKHBIncome SecPerpetual0.75%2.22%-0.03%76.214.36%A+/A-
SuncorpSUNPCMCPS II17/12/20174.65%2.98%-0.14%104.45.12%A /BBB+
SuncorpSUNPEMCPS II17/06/20203.40%3.84%-0.02%98.75.98%A /BBB+
Seven Network TELYS 4SVWPAPerp'l Pref2/12/20544.75%7.16%-0.02%789.41%BB+/BB-
WestpacWBCPCMCPS II31/03/20183.25%3.57%0.29%100.95.82%AA-/BBB-
WestpacWBCPDMCPS II8/03/20193.20%3.62%0.30%99.265.76%AA-/BBB-
WestpacWBCPEMCPS II22/09/20223.05%3.92%0.07%95.56.06%AA-/BBB+
WestpacWCTPAStep Up30/06/20161.00%3.07%0.56%98.295.21%AA-/BBB

** YTM for floating rate securities is an estimate using current interest rates. This will vary if rates change.
Source: Evans & Partners. Dealing Contact Michael Saba +61 3 9631 9813

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