Westpac will raise $488 million in additional Tier 1 capital. The third-largest bank in Australia by market capitalization, Westpac Banking Corp. (WBC.AX), announced on Monday that it will raise A$750 million ($488.1 million) through an Additional Tier 1 (AT1) capital transaction.
According to a note from the deal’s book-runners at 05:40 GMT on Monday, bidders have already submitted offers totaling A$2.35 billion at the lower end of the indicative margin range.
According to a previous Westpac announcement, the notes would be offered for A$100 each, and prospective investors have been informed that the interest margin will range from 3.10% to 3.3%.
Investors who previously purchased Westpac AT1 bonds will be able to reinvest their proceeds in the new bonds as part of the agreement.
The final margin will be determined after the book build, which will close on Tuesday at 00:30 GMT for new investors and on Wednesday at 03:00 GMT for those participating in reinvestment.
In September, Australia’s prudential regulator announced that it would assess whether the regulations governing AT1 bonds, which were affected by Credit Suisse’s collapse in March, were still appropriate.
According to APRA, banks employ AT1 bonds to stabilize cash flow during difficult times. After Credit Suisse’s bankruptcy this year, the banking authority in Switzerland wrote down bonds worth 16 billion Swiss francs ($17.8 billion), raising concerns among the world’s financial community.
As per the agreement, shareholders, who typically receive payments after bondholders in case of a bank or company collapse, received $3.23 billion, while holders of Credit Suisse AT1 bonds received nothing.
According to Assistant Treasurer Stephen Jones, Australian law would not permit AT1 bond investors to lose everything if a bank failed so that equity holders could get their money back.
The largest bank in Australia by market capitalization, Commonwealth Bank (CBA.AX), raised A$1.55 billion in May by offering AT1 bonds, the first such issue by a domestic bank in Australia since the Credit Suisse disaster.