New Issue: NAB Capital Notes 3

On 11 February 2019, National Australia Bank Limited (ASX: NAB, the “Issuer”) launched an offer for NAB Capital Notes 3 (Expected ASX Code: NABPF, the “Notes”), to raise [$750 million], with the ability to raise more or less.

These securities are structured as perpetual, subordinated, unsecured, convertible notes. Distributions are expected to be discretionary, non-cumulative, floating rate, fully franked, and paid on a quarterly basis in arrears until converted or redeemed. The Notes will be issued on the 20 March 2019 and the purpose of this transaction is to partially refinance the existing $1.51 billion NAB Convertible Preference Shares (NABPA) and for general corporate purposes. The margin on the Notes is expected to be set between 4.00% and 4.20% p.a. above 90-Day BBSW.

This security has no fixed maturity date but is scheduled for conversion into NAB ordinary shares on 19 June 2028, or later when conversion conditions have been satisfied. At the Issuer’s discretion, the Notes may be redeemed (subject to APRA approval), transferred or converted on 17 June 2026.  As this security meets the new capital instrument eligibility criteria under Basel III, it also contains the loss-absorbing terms and conditions known in the documentation as Common Equity and Non-Viability Trigger Events. The security, therefore, qualifies as Additional Tier 1 capital for NAB. 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. If conversion cannot occur for any reason, the Notes will be written-off and all noteholders’ rights terminated

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

$100.000

Capital Price

$100.000

Fixed / Floating

Floating

Running Yield**

[6.018% - 6.218%]

Payment Frequency

Quarterly

Yield to Maturity***

[6.190% - 6.390%]

Current Distribution

[6.018% - 6.218%]

Trading Margin

[4.000% - 4.200%]

Issue Margin / Coupon

[4.000% - 4.200%]

Optional Call Date

17 June 2026

Franking Credits Inclusive

Yes

Legal Final Maturity

ASX Listed

Yes (ASX Code: NABPF)

Next Ex-Date

[TBC]

Convertible

Yes

Next Payment Date

17 June 2019

GICS Sector

Banks

Next Cash Distribution

[TBC]

*Size is subject to final demand. **Based on a prospective trading margin of 4.000% - 4.200% plus 90-Day BBSW of 2.018%. ***Based on a prospective trading margin of 4.000% - 4.200% and an interpolated swap rate to call of 2.190% priced to the optional call date (17 June 2026).

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