Hot on the heels of Westpac’s $175 million issue of new Tier 2 notes, the bank has announced an issue of Tier 2 June 2026 bonds. Denominated in yen, they have the increasingly common non-viability clauses, which if triggered would allow the write-off of these notes or the conversion in to ordinary Westpac shares. Nothing is especially unusual about this issue of notes, except for one thing; they are bearer bonds. Legally, the person holding them is the person who owns them and they are almost as good as cash. Bearer bonds have been illegal in the US since 1982 as they have often been used to conceal ownership and avoid taxes or scrutiny.
They are being issued in Japan where 10 year bond rates are negative. Savings accounts rates are also low. Yet these bonds have been issued at an interest rate of 1.16%. Each bond has a face value of ¥100,000,000 or about AUD$1.25 million and only 102 are being issued for a total of ¥10.2 billion (AUD$130 million). So these bonds pay a positive rate of interest and are easy to store. All sorts of Japanese investors would find the pieces of paper attractive.
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