03 Aug – 07 Aug 2015

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Westpac Capital Notes 3 proves popular
Westpac announced the results of its institutional book-build for its latest hybrid (ASX Code: WBCPF) and it would seem the bank had little trouble in selling it. The offer size was increased from $750m to $1.25bn and the margin came in at the bottom of the 4.00% to 4.20% range. The fact that the 400bps margin for this type of hybrid is the highest-ever from one of the four major banks was a major selling point.

hybrid-yieldreport-7aug

MyState issues first tier 2 hybrid
MyState Bank announced it had priced $25m of floating rate notes in what is to be its inaugural issue of tier 2 capital. The subordinated notes mature in 10 years, are callable after five, and pay interest at a generous 500bps over BBSW. The notes are callable on 14 Aug 2020 and then on every interest payment date up until the final maturity date in 2025. While the notes look standard enough they carry Basel II compliant “non-viability trigger” which converts the notes into MyState Bank shares should APRA deem MyState to be non-viable. MyState’s MD Melos Sulicich said the issue would strength the MyState’s capital position while diversifying its capital base and allowing the maintenance of loan growth momentum.

hybrids-yieldreport-7aug

Woolworth’s WOWHC margin has widened in past months subsequent to earnings downgrades and a falling share price. The chart shows the WOWHC subordinated notes (Dec 2016) margin and the Woolworth’s March 2016 senior bond margin. Note both have widened in July this year. The Woolworth’s senior has stayed at recent highs whereas WOWHC has narrowed in recent days perhaps due to the coupon payment next week. The chart also show a ratio of WOWHCs margin over the senior debt. The ratio is at lows suggesting the sub notes look relatively expensive although this ratio would be expected to narrow a little as maturity approaches.

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ASX-LISTED HYBRIDS

COMPANYCODEHYBRID
TYPE
MATURITY
OR STEP-UP
DATE
MARGIN
INC FRANK
TRADING
MARGIN
Δ WEEKWEEK
CLOSE
YTM
Est**
ANZ Banking GroupANZPAMCPS I16/12/20163.10%3.39%0.15%100.3625.54%
ANZ Banking GroupANZPCMCPS II28/09/20173.10%3.35%-0.56%101.85.61%
ANZ Banking GroupANZPDMCPS II1/09/20213.40%4.21%0.08%98.456.47%
ANZ Banking GroupANZPECapital Note24/03/20223.25%4.20%-0.01%97.066.46%
Bendigo BankBENHBPerpetual21/10/20541.00%2.74%0.03%04.89%
Bendigo BankBENPDMCPS II13/12/20175.00%3.99%0.27%103.26.25%
Bendigo BankBENPEMCPS II30/11/20203.20%4.22%0.08%96.56.48%
Bendigo BankBENPFMCPSII15/06/20214.00%4.24%0.06%99.756.50%
Bank Of QueenslandBOQPDMCPS II16/04/20185.10%3.61%0.09%105.95.87%
CBA PERLS 3PCAPAStep Up6/04/20161.05%3.55%0.42%197.275.70%
CBA PERLS 6CBAPCMCPS II15/12/20183.80%3.66%-0.01%101.255.81%
CBA PERLS 7CBAPDMCPS II15/12/20222.80%4.06%-0.02%93.4996.21%
ChallengerCGFPACapital Note25/05/20203.40%4.29%0.11%97.56.44%
EldersELDPAPerp'l Pref30/06/2051N/A0.00%0.00%750.00%
IAGIAGPCMCPS II1/05/20174.00%3.87%0.17%101.856.13%
IAG RESIANGReset pref16/12/20194.00%3.44%0.16%1035.59%
Macquarie BankMBLHBIncome SecPerpetual1.70%3.55%0.06%74.65.70%
MacquarieMBLPACapital Note24/03/20203.30%4.20%0.09%97.926.46%
MacquarieMQGPACapital Note19/06/20184.00%3.83%-0.02%101.1796.09%
Multiplex SITESMXUPAPerp'l PrefPerpetual3.90%5.35%0.03%83.957.50%
Nat Aust BankNABHAIncome SecPerpetual1.25%3.07%0.05%73.155.22%
Nat Aust BankNABPAMCPS II20/03/20193.20%4.03%0.12%986.18%
Nat Aust BankNABPBMCPS II17/12/20203.25%4.09%0.05%976.24%
NufarmNFNGStep UpPerpetual3.90%5.33%-0.09%85.717.59%
PaperlinxPXUPAPerp'l Pref30/06/2052N/A8.80%0.00%911.06%
Ramsay Health CareRHCPAPerp'l PrefPerpetual4.85%4.74%0.03%103.457.00%
Suncorp-MetwaySBKHBIncome SecPerpetual0.75%2.21%0.00%76.654.36%
SuncorpSUNPCMCPS II17/12/20174.65%3.73%0.64%102.945.88%
SuncorpSUNPEMCPS II17/06/20203.40%3.93%0.03%98.586.08%
Seven Network TELYS 4SVWPAPerp'l Pref2/12/20544.75%7.91%0.54%73.110.17%
WestpacWBCPCMCPS II31/03/20183.25%3.65%-0.08%100.955.91%
WestpacWBCPDMCPS II8/03/20193.20%3.84%-0.10%98.795.99%
WestpacWBCPEMCPS II23/09/20223.05%4.19%0.10%94.36.34%
WestpacWCTPAStep Up30/06/20161.00%3.40%0.69%98.2115.55%

** 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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