New Issue: Westpac Capital Notes 10

On 20 November 2023, Westpac Banking Corporation (ASX: WBC, the Issuer) launched an offer for Westpac Capital Notes 10 (the Notes, expected ASX code: WBCPM), to raise $750 million, with the ability to raise more or less. The purpose of the offer is to raise regulatory capital (Additional Tier 1) for WBC, with the proceeds to be used for general purposes.

WBCPM are structured as, convertible, transferable, redeemable, subordinated, perpetual, unsecured notes. Distributions are discretionary, non-cumulative, floating rate, subject to distribution payment conditions, and expected to be fully franked, paid on a quarterly basis in arrears until converted or redeemed. The margin is guided at 3.10-3.30% p.a. above 90-day BBSW.

This security has no fixed maturity date but is scheduled for mandatory conversion into WBC ordinary shares on 22 June 2034, or later, when conversion conditions have been satisfied. At the Issuer’s discretion, WBC can redeem (subject to approval by APRA), transfer, or convert the Notes into WBC ordinary shares (subject to conversion conditions) on 22 September 2031, 22 December 2031, 22 March 2032 or 22 June 2032. The Notes may also be redeemed (subject to APRA approval), transferred, or converted into WBC ordinary shares (subject to conversion conditions) if a Tax or Regulatory Event occurs. The Notes will convert into WBC ordinary shares following an Acquisition Event (subject to conversion conditions).

We recommend investors Subscribe due to concessional value being offered and our fundamental credit confidence in the Issuer. We expect strong new money demand for this security and material roll demand. Given such a demand dynamic is similar to more recently issued Big Four AT1 Hybrids that were offered with little to no concession, we view positively the 13bps concession to spot offered at the left-hand side of the indicative range.