CBA PERLS VI margin set at 3.80pc
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Nicholas Grove is a Morningstar journalist.
Commonwealth Bank of Australia (CBA) on Wednesday said the margin on its PERLS VI hybrids offer has been set at 3.80 per cent following the bookbuild, in line with Morningstar's expectations.
After receiving strong broker demand for the offer, the bank said it has allocated $1.5 billion of PERLS VI (Perpetual Exchangeable Resaleable Securities VI) on a firm basis under the broker firm offer. The bank was initially seeking to raise $750 million through the offer.
While the bank will continue to accept applications under the reinvestment offer, securityholder offer and customer offer, it said the general offer, which was to have been open to all applicants not applying under the other offers, will now not proceed.
The bank said it reserves the right to scale applications under the reinvestment offer, securityholder offer and customer offer, subject to demand.
"The group is very pleased with the strong support from investors for the offer, particularly as PERLS VI will be the first Basel III compliant Tier 1 hybrid issued by an Australian bank," CBA chief financial officer David Craig said.
Proceeds from the offer will be used, to the extent necessary, to refinance PERLS IV and to otherwise fund CBA's business, the bank said.
Morningstar equities analyst Ravi Reddy said in a report that PERLS VI potentially offers attractive distributions, backed by a business that has strong competitive advantages.
"However, the additional terms such as the mandatory conversion trigger conditions make it the most equity-like of the major bank hybrids on issue and therefore the riskiest in that relatively low-risk group. Investors need to be comfortable with this," he said.
"We remind potential investors to weigh up alternative investment options, depending on their individual preferences - bank deposits, bank equity, or bank debt such as this security."
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