Commonwealth Bank of Australia, the country's biggest lender, aims to raise about $900 million to bolster its capital position with a hybrid security offer.
The bank said when it released its annual results earlier this month it was planning to raise a minimum $700 million from hybrid securities to increase its regulatory capital reserves.
Hybrid securities have characteristics of both bonds and equity by paying a regular income till maturity, at which point investors usually have the option to convert their holding to common stock.
The offer, to be known as PERLS V, will increase the bank's Tier 1 capital ratio by 30 basis points, CBA said in a statement today.
That would take the ratio to about 8.37 per cent, given it was at 8.07 per cent as of June 30.The securities are being offered to shareholders, holders of previous hybrid issues, Australian clients of brokers to the office, certain institutional investors and other Australian residents.
CBA will conduct a bookbuild on September 4 for eligible institutions and brokers.
There will be an offer to security holders and a general offer, for a maximum $50 million, both of which will probably close on October 2.
The PERLS V securities will pay quarterly distributions till the exchange date on October 31, 2014, at which point the bank will arrange for the securities to be resold, converted to ordinary shares or bought back.
The securities, which are likely to be trade on the Australian Securities Exchange, will be assigned an A+ rating by Standard & Poor's.Shares in CBA gained 40 cents to close at $45.15.
AAP