Westpac launched its anticipated subordinated note issue yesterday - just a day after ANZ completed the book-build for its capital note issue. Westpac is looking to raise at least A$750 million, but, like ANZ, may well upsize the issue to A$1 billion, or more.  Westpac has considerable incentive to increase the size of its Subordinated Notes II issue because it is offering Westpac Stapled Preferred Securities holders priority over other applicants, if they choose to roll over into the subordinated notes. There is A$1.04 billion of SPS notes outstanding and the notes pay a coupon of 240 basis points over bank bills. The new subordinated notes will pay a coupon of 230 to 245 bps over the 90-day bank bill rate. The actual margin and the size of the issue will be determined in a book-build to be held next Wednesday.The structure of the Basel III-compliant subordinated notes follows the template established by Suncorp earlier this year. As the notes are subject to a non-viability trigger, there is potential for them to be converted into ordinary Westpac shares, which is not acceptable to many institutional investors. Suncorp overcame this problem by allowing note-holders to request that shares allocated upon a conversion be assigned to a trustee for sale on-market, with the proceeds being returned to the affected investors. Westpac is offering the same facility to investors in Subordinated Notes II.The coupon payable on the notes is a cash coupon without franking credits and is cumulative. The coupon can only be paid if Westpac is solvent at the time and will remain so after the coupon is paid. The notes have a 10-year non-call maturity structure. This means that the notes must be redeemed for cash at face value after 10 years.  However, the same solvency provision applies to redemption of the notes. The notes can also be redeemed after five years, but only if the early redemption is approved by the Australian Prudential Regulation Authority. Are the notes good value? There are two issues to consider here.First, the Suncorp subordinated notes sold in April were priced at 285 bps over the 90-day bank bill rate and the margin has since moved wider. Given that Suncorp senior debt is rated only one notch lower than the senior debt of Westpac, the Suncorp subordinated notes appear to be a better buy.The second consideration is price comparison with the ANZ Capital Notes issue that opened yesterday. If the Westpac subordinated notes price at the tight end of the range, as these issues almost invariably do, the notes will be offering a spread over the bank bill rate that is 110 bps less than what the ANZ capital notes will pay on a gross basis. (The ANZ capital notes coupons will come with franking).Some will argue that as both notes include a non-viability conversion/write-off trigger the risk profile is the same. Therefore, why accept a return that is 110 bps less?This argument is incorrect because it ignores the common equity capital trigger that also attaches to the