Holders of various type of ANZ securities, including ordinary shares, ASX-listed notes and hybrids are currently being offered new ANZ Capital Notes 4 (ASX code: ANZPG). In the case of ANZ CPS2 (ASX code: ANZPA) holders, they have the additional offer a “roll-over” facility into the new capital notes. That is, they will be able to exchange their existing ANZPA holdings for new securities.
While a substantial number are expected to exchange their holdings for the new securities, what will happen to ANZPA holders who choose not to do so? In an announcement accompanying the details of the new ANZPG, ANZ said it will issue a “resale” notice which, under the issue terms of the ANZPA, will result in a compulsorily sale to a third party on 15 December, 2016 nominated by ANZ. CPS2 holders will then receive $100 cash plus accrued dividend, which is the equivalent of what holders would receive if CPS2 were redeemed.
Resale is subject to two conditions, the first being APRA approval and the second is ANZ must find a willing third party. APRA approval is thought to be likely as selling securities already on issue to a third party would leave ANZ’s balance sheet largely unchanged. Finding a third party has not been a problem in the past and the last example occurred when Commonwealth Bank took this route for its PERLS V (ASX code: CBAPA) in 2014.
If resale were not to occur for whatever reason, mandatory conversion would then triggered as long as certain conditions were met. The price of ANZ shares would need to fall by around 60% from current levels for the conditions not to be met. So one could be quite confident, although not certain, mandatory conversion would go ahead in the absence of a resale arrangement. Mandatory conversion would result in CPS2 holders receiving $101.01 worth of ANZ ordinary shares plus accrued dividend per CPS2. Holders would then need to sell these ANZ shares in order to be in the same position they would have been in if redemption had taken place.