CBA PERLS III gets adjusted, other PERLS wait

12 August 2015

Commonwealth Bank announced a $5bn capital raising via rights issue and in the process announced a change to the maximum conversion ratio of its PERLS III hybrid security. These Commonwealth hybrids were issued in April 2006 and are somewhat different from the standard mandatory converting securities in that they have a reset clause which will be activated in 2016. The change to the conversion ratio will be fairly minor. Currently, the maximum conversion ratio is 100 shares and after the adjustment and in the absence of major moves in the prices between the day of the announcement and the “ex-rights” date, the conversion number will be a few percent higher. Commonwealth said it had sought approval from APRA to adjust its other listed hybrids in a similar way but APRA had not provided approval and the bank was seeking to “discuss this further” with the regulator.