SYDNEY, March 27 Australian insurer Suncorp
Group plans to raise around A$250 million ($191
million) of hybrid securities to strengthen its capital base, it
said on Monday, with the bank hoping to tap piles of cash
looking for a higher-yielding home.
The offer consists of additional tier 1 capital, a form of
capital required by financial regulators to ensure banks have
sufficient reserves to avoid the need for a taxpayer-funded
bailout in the event of a financial crisis.
Banks sell subordinated debt and hybrids, a mix of debt and
equity, because they are cheaper to issue than shares alone.
This would be the third such issue this year, following
Commonwealth Bank of Australia (CBA)'s A$1.45 billion and
financial institution Challenger Ltd's A$430 million.
Both transactions were significantly oversubscribed even
after the issues were increased substantially.
At least A$1.6 billion of hybrid securities matured last
year, leaving investors underweight in the sector.
Hybrid offers typically pay attractive margins because they
are riskier than senior debt.
Price guidance of the Suncorp issue is 390 basis points to
410 basis points over the bank bill swap rate, according to the
prospectus, or the equivalent of just below 6 percent. The final
margin will be determined on April 3.
Steve Johnston, Suncorp's chief financial officer, said the
issue was part of the bank's ongoing funding and capital
The insurer said the proceeds are additional capital and
won't be applied to a A$560 million hybrid issue callable in
The new offer consists of perpetual notes with a mandatory
equity conversion date of June 17, 2024 and are callable in June
2022, according to the prospectus.
The offer will close on April 28 and start trading on May
11. Union Bank of Switzerland is the arranger and lead manager
with Morgans Financial and National Australia Bank also
jointly leading the issue.
($1 = 1.3103 Australian dollars)
(Reporting by Cecile Lefort; Editing by Simon Cameron-Moore)