Herbert Smith Freehills has advised the Joint Lead Managers of Westpac Banking Corporation’s (Westpac) offer of hybrid securities known as Westpac Capital Notes 2 (Notes), which are fully paid, non-cumulative, convertible, transferable, redeemable, subordinated, perpetual, unsecured notes of Westpac (Offer). The Offer was launched on 7 May 2014 and is expected to raise approximately A$750 million, with the ability to raise more or less.

The Notes are being offered at an issue price of $100 each and are expected to be quoted on the ASX.

The Offer includes a reinvestment offer for eligible holders of Westpac stapled preferred securities (issued by Westpac under a prospectus dated 2 March 2009) (SPS II) (Reinvestment Offer), which will allow eligible SPS II holders to sell some or all of their SPS II through an on-market buy-back facility and automatically reinvest the proceeds in the Notes.

APRA has confirmed that the Notes will qualify as Additional Tier 1 Capital securities under its Basel III capital adequacy framework, which commenced on 1 January 2013. The proceeds received by Westpac under the Offer will be used for general business purposes.

Herbert Smith Freehills acted for the arranger, Westpac Institutional Bank, and for the 6 joint lead managers, being Deutsche Bank AG, Sydney Branch, Goldman Sachs Australia Pty Ltd, National Australia Bank Limited, ANZ Securities Limited, Commonwealth Bank of Australia and Westpac Institutional Bank. JBWere was appointed as co-manager and Westpac Online Investing was appointed as online manager to the transaction.

The Herbert Smith Freehills team was led by Joint Head of Equity Capital Markets, Philippa Stone, and Executive Counsel, Lauren Magraith, supported by Senior Associate Lucy Hall and Solicitor Tom Cooper.

‘The Westpac Capital Notes 2 issue is the most recent of a string of successful hybrid issuances by Westpac’ said Stone. ‘Following our roles on most of the major bank hybrid offerings since the release of APRA’s Basel III prudential standards, we are delighted to have acted for the joint lead managers on another Westpac hybrid security issuance, and to have also advised on various aspects of the Reinvestment Offer.’

Herbert Smith Freehills’ capital markets team has extensive experience acting for both issuers and joint lead managers on hybrid transactions, having also recently acted for Commonwealth Bank of Australia on its $2 billion offer of PERLS VI (and concurrent PERLS IV buy-back and Reinvestment Offer) (the first fully Basel III compliant offering by an Australian bank), for Bendigo and Adelaide Bank on its $269 million issue of Convertible Preference Shares and concurrent Reset Preference Share Reinvestment Offer (the second such fully Basel III compliant offering), for the joint lead managers on Westpac’s $925 million Subordinated Notes II and $1.38 billion Capital Notes offers, ANZ’s $1.3 billion Capital Notes 2 and $1.12 billion Capital Notes offers, Macquarie’s $580 million Capital Notes offer and NAB’s $1.51 billion CPS offer (each of which were Basel III compliant offerings), as well as for Colonial on its $1 billion offer of subordinated notes and for the joint lead managers on ANZ’s $1.5 billion offer of ANZ Subordinated Notes, AMP’s $325 million Subordinated Notes offer, IAG’s $377 million offer of Convertible Preference Shares, and for AGL Energy Limited on its $900 million Entitlement Offer and $650 million Subordinated Notes offer.