This week, Australian regional bank, Bendigo and Adelaide Bank (BEN) launched a new subordinated debt issue. The issue is for a floating rate note (FRN) which is a fully paid, redeemable, subordinated and unsecured debt obligation of BEN. The deal closed yesterday at +280 basis points (5bps tighter than original guidance). The order book was oversubscribed at around $500m; BEN will upsize to $300m.
The issue has a 10 year maturity (January 2024) but will be callable after five years. FIIG continues to expect Australian banks to call their subordinated issues at the first opportunity and APRA has confirmed the Notes will qualify as Tier 2 Capital under Basel III capital adequacy standards. The Notes are expected to receive an investment grade rating from the rating agencies (to be confirmed).
As a new structure, the Notes include a non-viability loss absorption clause. Upon a non-viability trigger event BEN may be required to convert all or some of the Notes to ordinary shares.
The FRNs will rank senior to ordinary shares and Tier 1 capital instruments, and equally with Tier 2 instruments issued on or after 1 January 2013 and BEN’s Upper Tier 2 capital security issued on 13 July 1998. They will rank below senior creditors including Lower Tier 2 instruments issued prior to 1 January 2013.
The Notes are available to wholesale clients only. Please speak to your FIIG representative if you are interested in the new issue or would like further details including the issue term sheet.