New Issue: Macquarie Bank Capital Notes 3

On 3 August 2021, Macquarie Bank Limited (MBL) launched an offer for Macquarie Bank Capital Notes 3 (BCN3) to raise $400 million, with the ability to raise more or less. BCN3 are expected to be quoted on the Australian Stock Exchange (ASX) under the code MBLPD.

BCN3 securities are perpetual, unsecured, convertible, non-cumulative and subordinated notes. The purpose of the transaction is to raise regulatory capital (Additional Tier 1) for MBL. The margin is guided at [2.90%-3.10%] p.a. above 90-day BBSW and distributions are expected to be franked at the same rate (currently 40%) as Macquarie Group Limited ordinary shares (ASX: MQG).

This security has no fixed maturity date but is scheduled for mandatory conversion into MGL ordinary shares on 8 September 2031, or the next distribution payment date on which the exchange conditions are satisfied. At MBL’s discretion, the notes may be resold or exchanged, or subject to APRA approval redeemed on 7 September 2028, 7 March 2029, 7 September 2029 or if a Tax Event or Regulatory Event occurs, subject to conditions.

We see fair value around the 275-280bps margin mark, at an offered margin of 290-310bps we recommend investors Subscribe due to the relative value premium and our fundamental credit comfort.