ASB plans $400m capital raising
ASB Bank plans to raise as much as $400 million by issuing 10-year subordinated notes.
Holders of subordinated or "junior" debt rank behind other creditors in the event of a liquidation, but are rewarded with higher interest rates.
The interest paid on ASB's unsecured notes is based on a margin added to the five-year swap rate, and will be set following a bookbuild process.
A note is the same as a bond, except bonds usually refer to longer-term debt issues of at least 10 years.
ASB has applied to list the notes on the NZX debt market, but has not yet got approval for trading.
Ratings agency Standard & Poor's assigned the notes a BBB+ long-term credit rating, based on the strength of ASB's parent, Commonwealth Bank of Australia (CBA).
However, CBA does not explicitly guarantee the debt.
The debt issue also contains a contingency clause which could force notes to be converted into shares in CBA, based on certain trigger events.
Banks frequently issue subordinated debt to help meet capital requirements, improve leverage, and buffer senior debt holders from potential losses.
ASB will use the notes to help meet its tier-2 capital requirement, a regulatory threshold overseen by the Reserve Bank.
The offer opens next Tuesday, with the maturity date for the notes to be repaid in full June 15, 2024.
The joint lead managers for the issue are ASB Securities, Macquarie Capital NZ, Goldman Sachs NZ, Deutsche Craigs and Forsyth Barr.