On 28 October 2020, Bendigo and Adelaide Bank Limited (ASX: BEN) launched an offer for Bendigo and Adelaide Bank Capital Notes (ASX: BENPH), to raise $350 million, with the ability to raise more or less. The offer is accompanied by a Reinvestment Offer for holders of Bendigo and Adelaide Bank Convertible Preference Shares 2 (ASX: BENPE). The proceeds will be used to fund the redemption of BENPE and for general corporate purposes. It may also be used to fund the redemption of Bendigo and Adelaide Bank Convertible Preference Shares 3 (ASX: BENPF), which have a first call date on 15 June 2021. These securities are structured as unsecured, subordinated, perpetual convertible notes. Distributions are discretionary, non-cumulative, floating rate, expected to be fully franked and paid on a quarterly basis in arrears until converted or redeemed. The margin is guided at 3.80% to 4.00% p.a. above 90-day BBSW.
This security has no fixed maturity date but is scheduled for mandatory conversion into BEN ordinary shares on 15 June 2029, or later, when conversion conditions have been satisfied. At the Issuer’s discretion, and subject to approval by APRA, BEN can redeem or resell the Notes for cash at face value or convert the Notes into BEN ordinary shares on 15 June 2027. The Notes may also be redeemed, resold or converted into BEN ordinary shares if a Franking, Tax or Regulatory Event occurs. The Notes will convert into BEN ordinary shares following a Change of Control Event, subject to conversion conditions. As this security meets capital instrument eligibility criteria under Basel III, it also contains the loss absorbing terms and conditions known in the documentation as Capital Trigger or Non-Viability Trigger Events. The security therefore qualifies as Additional Tier 1 capital. Upon the occurrence of either of these events this security will be automatically converted into BEN ordinary shares without the protection of conversion conditions. If conversion cannot occur for any reason, the Notes will be written off and all Holders' rights terminated.
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