ASB Bank Limited, the New Zealand subsidiary of the Commonwealth Bank of Australia, yesterday announced that it was offering up to NZ$250 million of subordinated unsecured convertible notes to retail investors in New Zealand and to eligible institutional investors. The issuer will accept oversubscriptions of up to NZ$150 million.These instruments - to be known as ASB Notes 2 - are Tier 2 Capital, and will be applied to meet ASB's and CBA's regulatory capital requirements.ASB said in a media release that the offer would open next week, on 3 November 2016, and is expected to close on 25 November 2016.Interest is scheduled to be paid quarterly in arrears and is subject to ASB satisfying the solvency condition. The ASB Notes 2 will have a term of approximately ten years but may be repaid earlier in certain circumstances. ASB Notes 2 will be converted into ordinary Commonwealth Bank of Australia shares, or written off if a non-viability trigger event occurs. ASB itself has explained that a non-viability trigger event can occur if (among other things) ASB or CBA experience severe financial difficulty, although CBA does not guarantee ASB or ASB Notes 2.Any interest that is not paid because ASB has not satisfied the solvency condition will also earn interest.The indicative margin range for ASB Notes 2 is 2.70 per cent to 2.85 per cent per annum. The margin will be announced by ASB via NZX on or before the Opening Date. The margin will not change over the term of ASB Notes 2.ASB intends to quote ASB Notes 2 on the NZX Debt Market and they have been assigned a BBB+ rating by Standard & Poor's (Australia) Pty Ltd.ASB has appointed CBA and Forsyth Barr as arrangers and joint lead managers for the offer, while BNZ, Deutsche Craigs, and Macquarie have been appointed as joint lead managers.The full details of the Offer are contained in the product disclosure statement, dated 25 October 2016 which may be viewed at www.asb.co.nz/subordinated-notes2  There are restrictions on offering, issuing or selling ASB Notes 2 outside New Zealand, as set out in the PDS. No action has been taken to permit a public offer of ASB Notes 2 in any place other than New Zealand.