Macquarie Bank has relaunched its hybrid offer, Capital Notes 2, offering a substantially higher margin than the one it offered in February.
Macquarie Bank Capital Notes 2 was originally launched on February 11 but withdrawn on March 13, with the bank citing “significantly changed market conditions”.
Under the terms of the original offer, Macquarie was seeking A$400 million of capital, paying a margin of 2.9 per cent over the bank bill swap rate and with a first redemption date of December 2025.
Under the terms of the revised offer, Macquarie will pay a margin of 4.7 per cent to 4.9 per cent over BBSW. The redemption dates are unchanged.
The re-pricing reflects that fact that demand for hybrids has softened and many are now trading below their issue prices. Also, there were two prospectus withdrawals and a redemption deferral in March, which has made investors wary.
Other terms of the offer are unchanged. Macquarie Bank Capital Notes 2 are perpetual, unsecured, convertible subordinated notes which qualify as additional tier 1 capital for the bank.
Distributions are discretionary and non-cumulative, and are expected to be partially franked. The notes may be redeemed on December 2025, June 2026 or December 2026, and they have a mandatory conversion date of December 2028.
There has been plenty going on in the hybrid market over the past couple of months. NAB also withdrew a hybrid issue. The offer was launched on February 17 but withdrawn on March 12.
NAB said that market conditions “have changed substantially since the offer was launched and that the ongoing market volatility would be likely to impact on the trading value of the [notes]”.
Both Macquarie and NAB said they would repay investors in old capital note issues that had reached their call dates.
Late in March wealth manager Challenger cancelled plans to launch new a hybrid security issue, which it was to have used to redeem its current issue of Challenger Capital Notes. It pushed out repurchase of the hybrids by up to two years.
The $345 million of notes have a call date of 25 May this year and a mandatory conversion date of 25 May 2022.
Challenger received approval from the Australian Prudential Regulation Authority to repurchase the notes on any quarterly distribution payment date up to the mandatory conversion date.
In the meantime, note holders will continue to receive quarterly distribution payments. The notes will continue to be traded on the ASX.