Suncorp Group has announced the launch of an offer of Capital Notes 5 to raise approximately $300 million and at the same time revealed it had filed warning notices with the Australian Prudential Regulation Authority over stress-testing requirements.
Capital Notes 5 are being issued as part of Suncorp’s ongoing funding and capital management strategy to raise additional Tier 1 Capital. The offer includes an optional reinvestment offer for certain eligible Capital Notes 2 holders.
Capital Notes 5 will be the first retail hybrid security issued by Suncorp under the Design and Distribution Obligations Regime.
Suncorp advises that the margin is expected to be in the range of 2.80% to 3.00% to be determined under the bookbuild.
It is expecting to announce the margin and confirmation of allocation on or before 23 April 2024. The issue date is expected to be 14 May 2024. The first optional exchange date is 17 June 2030 with a scheduled mandatory conversion date of 17 December 2032.
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Capital Notes 5 are fully paid, subordinated, perpetual, guaranteed, and unsecured notes issued by Suncorp, which are convertible into Ordinary Shares in certain circumstances.
Suncorp disclosed in its prospectus that, “In March 2024, breaches were lodged with APRA relating to their review of APS 210 stress testing requirements. Engagement with APRA has been ongoing following receipt of their formal findings and a project team established to address the deficiencies. The project is expected to achieve full compliance with the APS 210 requirements in the second half of calendar year 2024.”
The stress testing requirements refers to liquidity.
Suncorp told The Australian Financial Review on Tuesday that work was underway to “address enhancements identified by APRA to our stress-testing framework”.
“There were no customer impacts, no penalty applied, and APRA has closed the breach,” a spokesman said.
The AFR said that “stress tests are conducted to see how institutions can perform in periods of hardship, such as high unemployment or plummeting house prices.”
