No retail rush for bank hybrids
Hybrid fixed-interest securities marketed by three banks and one industrial company over the last week or two have failed to generate the scale of investor demand sometimes associated with such issues, at least in the case of those promoted by the banks.Last week, ANZ and Westpac, and then CBA-owned Colonial all upsized their issues and set coupon rates, but perhaps too many issues came to the market at the same time. Investor demand for ANZ's comparatively simple subordinated debt issue was such that not only was the credit spread on the coupon set at the low end of the indicative range of 275 basis points to 300 bps but the bank trebled the issue size to A$1.5 billion.Westpac did not receive quite the same warm reception for its convertible preference shares. Given a marketing range for the credit spread of 320 bps to 350 bps, the spread was set at 325 bps and the issue size was set at an imprecise plus or minus $1.0 billion, after being launched at $750 million.Later in the week, Tabcorp priced its offer of subordinated debt at 400 bps over the bank bill rate, compared with the marketing range of 400 bps to 450 bps, but left the issue size unchanged at $200 million. However, Tabcorp did say that it may increase the issue size, depending of the level of subscriptions received.If a broker rings you twice to ascertain your interest or lack thereof in a new issue, then the issue in question is struggling. This happened not only with the Westpac CPS issue but also with the Colonial Group subordinated notes issue.In the case of the latter, the difficult sales job was seemingly confirmed with the outcome of Thursday's book build only being announced late on Friday by Colonial. The apparently face-saving announcement said the issue size had been increased to $1.0 billion from $500 million and the credit spread on the coupon was set at 325 bps.While no credit spread was specified in the original prospectus, 325 bps is at the lower end of the unofficial marketing range of 325 bps to 375 bps.