From Bell Potter
ANZ announced the offer of a new Additional Tier 1 (AT1) capital security, being ANZ Capital Notes 8 (ASX:AN3PK), to raise ~A$1bn on 15 February 2023. The ensuing margin bookbuild on 22 February 2023 was heavily subscribed and resulted in an early closure of the book with allocation scale-backs.
The distribution margin was pegged at 3m plus 275pb over, the low of the two indicative margin points and the bank issued A$1.5bn in paper. The issuer has now also redeemed all 9.7m ANZ Capital Notes 3 (ASX:AN3PF) for their face value of $100.
Approximately A$502m of the redemption proceeds were reinvested in the Notes under the Reinvestment Offer. The balance of around A$998m came from new money.
The distribution rate for the first distribution period from (and including) the issue date of 24 March 2023 to (but excluding) the first distribution payment date (which is expected to be 20 June 2023) is 4.5151%. The distribution rate is calculated as:
Investors will receive a distribution amount that represents the number of applicable interest days in the quarter (i.e. 88) from this headline annual rate.
Also read: ANZ Capital Notes 8 Raising Announced
The risk in listing delay
The ANZ issue was heavily over-subscribed with new money bids closing 2 days after launch. Roll-over monies closed a week later. Investors are routinely asked to bid on pricing at the launch date. On 15 February 2023, credit markets were stable and the credit risk was seemingly benign at the market rate of +275bps over BBSW3m. Since then, financial markets have changed dramatically with SVB Bank, Signature Bank and Credit Suisse collapsing. Risk margins as a result have blown out by approximately +50bps.
Subscribers to the ANZ Capital Note 8 Series have essentially had their funds locked up for over a month, without the ability to transact on fears that the global banking situation could worsen.
When a bank issues Tier 2 Paper (T2) via the wholesale Over-The-Counter Market (OTC) or any other debt, the paper usually trades the next day on a forward settlement basis. If this is okay for institutional investors, why aren’t the same rules being applied to retail investors who have essentially had their funds locked up for over a month, carrying credit market risk? In our view, ASIC should work with the issuer and the arrangers of hybrid securities to rectify this anomaly.
Article update 5 April, 2023 –
Challenger Capital Notes 4 are due to list on Thursday 6 April and are likely to trade at a discount. Like AN3PK, the book-build margin was set a month before listing at a margin of BBSW3m plus 360bps. Credit spreads have since widened and been rather volatile.
