On 9 October 2019, Commonwealth Bank of Australia (“CBA” / the “Issuer”) launched an offer for CommBank PERLS XII Capital Notes (prospective ASX Code: CBAPI / the “Notes”). The offer size is guided to be $750 million, with the bank retaining the ability to raise more or less. These securities are structured as perpetual, subordinated, unsecured, convertible notes. Distributions are expected to be discretionary, non-accumulative, floating rate, fully franked, and paid on a quarterly basis in arrears until converted or redeemed. The Notes will be issued on 14 November 2019 and the margin is expected to be set between 3.00% and 3.20%.
This security has no fixed maturity date but is scheduled for mandatory conversion into CBA ordinary shares on 20 April 2029, or later when conversion conditions have been satisfied. At the Issuer’s discretion, and subject to approval by APRA, the Notes may be redeemed / transferred or converted on 20 April 2027. As this security meets the new capital instrument eligibility under Basel III, it also contains the loss-absorbing terms and conditions known in the documentation as a Capital Trigger Event and Non-Viability Event. The Notes therefore qualify as Additional Tier 1 (AT1) capital for CBA. Upon the occurrence of either of these events, this security will be automatically converted into ordinary shares or written-off without the protection of conversion conditions.
Conversion calculation ratios are set based on issue date VWAP and will be updated on issuance, with a Maximum Exchange Number calculated based on the issue date VWAP for Mandatory Exchange.
Summary details of the transaction are listed in the table below:
|
Product Type |
Capital Note |
Last Price |
$100.00 |
|
Issue Size* |
$750,000,000 |
Accrued |
$0.00 |
|
Par Value |
$100.00 |
Capital Price |
$100.00 |
|
Fixed / Floating |
Floating |
Running Yield** |
3.884% - 4.084% |
|
Payment Frequency |
Quarterly |
Yield to Maturity** |
3.884% - 4.084% |
|
Current Distribution** |
3.838% - 4.038% |
Trading Margin** |
3.000% - 3.200% |
|
Issue Margin / Coupon** |
3.000% - 3.200% |
Optional Call Date |
20 April 2027 |
|
Franking Credits Inclusive |
Yes |
Legal Final Maturity |
|
|
ASX Listed |
Yes (ASX Code: CBAPI) |
Next Ex-Date |
TBC |
|
Convertible |
Yes |
Next Payment Date |
15 March 2020 |
|
GICS Sector |
Banks |
Next Cash Distribution |
TBC |
* Subject to change, offer size is $750 million, with the ability to raise more or less.
** Based on issue margin range of 3.00 to 3.20% plus either a 90-Day BBSW rate of 0.8384% and/or an interpolated swap rate to call of 0.8840% and an expected call date of 20 April 2027.
All pricing as of close 8 October 2019.
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