In a rare move, MyState Bank is sounding out investors about a new, wholesale over-the-counter hybrid issue (known as capital notes in the ASX listed market). There is little information available in the market, other than the hybrid will be a floating rate with Ord Minnett and Westpac Institutional Bank as lead managers.
KangaNews reported the move on Monday. The bank is rated Baa3/ BBB+ and the hybrid would likely be non-investment grade.
As this is an unusual transaction and will be difficult to price. Trading margins in the listed market are tight compared to the wholesale market and for this reason, I’m surprised MyState didn’t choose that market. Unless of course, it’s worried about not being able to raise the funds and the new DDO legislation.
To give you an example of trading margins, Bank of Queensland’s listed hybrid, BOQPF with a first optional conversion and expected maturity of May 2027, had a trading margin of 3.17% on 4 August 2022. Yet ANZ’s recent major bank Tier 2 subordinated bond transaction, which was substantially lower risk, was priced at BBSW + 2.70%. Depending on the term, I’d expect the transaction to have at least a ‘4 handle’.
Also read: Tier 2 Debt Raisings for ANZ and NAB
MyState last went to the market back in November 2021 when it issued $100 million senior unsecured funding for three years at 3 month BBSW +60 basis points. Lead manager was Laminar Capital.
