On 17/08/21, Westpac Banking Corporation (ASX: WBC) launched an offer for Westpac Capital Notes 8 (ASX: WBCPK), to raise $1.0 billion, with the ability to raise more or less. The offer is accompanied by a Reinvestment Offer for holders of Westpac Capital Notes 4 (ASX: WBCPG).
WBCPK are structured as redeemable, unsecured, subordinated, perpetual, convertible notes. The purpose of the transaction is to raise regulatory capital (Additional Tier 1) for WBC. The margin is guided at 2.90% to 3.10% p.a. above 90-day BBSW. Distributions are expected to be discretionary, non-cumulative, floating rate, fully franked, and paid on a quarterly basis in arrears until converted or redeemed.
This security has no fixed maturity date but is scheduled for mandatory conversion into WBC ordinary shares on 21 June 2032, or later, when conversion conditions have been satisfied. At the Issuer’s discretion, and subject to approval by APRA, WBC can redeem or transfer the Notes for cash at face value or convert the Notes into WBC ordinary shares on 21 September 2029, 21 December 2029, 21 March 2030 or 21 June 2030 subject to conversion conditions. The Notes may also be redeemed subject to APRA approval, resold or converted into WBC ordinary shares if a Tax or Regulatory Event occurs, subject to conversion conditions.
We see fair value around the 275bps margin mark, so at an offered margin of 290-310bps we recommend investors Subscribe due to the relative value premium and our fundamental credit comfort with the Issuer, WBC.