ANZ plans raising $786mn in convertible preference shares

The shares, considered tier 1 capital under Basel III reforms, are eyed to carry an annual margin of 3.1%-3.3%.

Australia & New Zealand Banking Group Ltd. said Tuesday it plans to raise 750 million Australian dollars (US$786.39 million) to give it the flexibility for timing when it redeems subordinated debt and other capital instruments.

The lender plans to test market demand for a "new-style hybrid capital issue" that it said would provide investors with a defensive investment option relative to ordinary equity in volatile markets.

ANZ said the capital raised will be eligible for transitional treatment as additional tier 1 capital when standards are updated with Basel III reforms--global regulations to require banks to hold more capital as a buffer against needing assistance.

The Melbourne-based lender said convertible preference shares that will convert to ordinary shares by September 2019 will be offered to Australian shareholders, and retail and institutional investors. The offer is set to open at the end of August and close Sept. 21 for the general offer and Sept. 27 for clients of syndicate brokers.

"ANZ continues to have a peer-leading capital position and this offer provides us with some additional flexibility to manage future redemptions," said Peter Marriott, chief financial officer of the Melbourne-based lender.

The offer, which will be priced at A$100 per preference share expected to carry an annual margin of 3.1%-3.3% and pay semi-annual dividends, doesn't require shareholder approval.

View the full story in The Wall Street Journal.