It has now become clear why ANZ is seeking to raise Additional Tier 1 capital from international investors. ANZ is breaking new ground here but it is not about to be followed by a flood of international AT1 issuance by the other major banks.The simple reason why ANZ is prepared to accept the considerable additional cost of raising AT1 capital from international investors is because it has to. ANZ has run out of available franking credits (but the other major banks have not).The expected US dollar denominated issue of AT1 capital is not the game changer that some have purported. Rather, it is a pragmatic recognition of reality.The Australian Financial Review reported yesterday that ANZ has obtained a private ruling from the Australian Taxation Office allowing dividends to be paid on AT1 capital without franking credits attached, provided the capital was issued by an offshore branch of the bank and sold to international investors. Furthermore, it is claimed that this will lead to 30 per cent reduction in the cost of such issuance than if franking credits had to be attached.This is an economic fiction. The AFR goes on to reveal that the likely cost of the proposed international AT1 issuance will be a dividend rate of 550 basis points to 600 bps over the 90 day bank bill rate, in Australian dollar terms. Using the current 90 day rate and the minimum margin, that equates to a 7.5 per cent per annum dividend rate. This will be an after tax cost to ANZ because dividend payments are not tax deductible.Let's assume ANZ could have opted to issue the AT1 capital to domestic investors. If they did, the likely dividend rate, using the current Westpac Capital Notes 4 issue as an example, would be 490 bps over the 90 day bank bill rate or 6.9 per cent per annum. But the addition of franking credits to the distributions allows the after tax cost of the dividends to be reduced by the value of the franking credits. The after tax cost to ANZ would be just 4.83 per cent per annum, assuming the dividends were fully franked. Thus, ANZ will pay international investors 55 per cent more than it would pay domestic investors if it could issue in the domestic market.But it can't. ANZ's 2015 annual report reveals that, following the payment of the final dividend for fiscal 2015, it exhausted its franking credits.The private ruling from the ATO will allow the streaming of franking credits to investors who can use them and away from those that can't, for the first time. This means ANZ will have more franking credits available for shareholders than it otherwise would have.Franking credits have an economic value of 30 cents in the hands of shareholders who can fully utilise the tax credit but they have no value to the bank per se. In a release to the Australian Stock Exchange dated 13 November 2015, then CFO, Shayne Elliott, said the bank expected to be able