The CBA issue is expected to raise about $750 million and is being marketed at a margin of between 3 and 3.1 percentage points over the bank rate, but traders expect the transaction to attract healthy demand and be increased to $1 billion.
A margin of 3 per cent above the bank rate is in line with secondary market pricing, but higher than the 2.75 per cent paid by ANZ when it raised hybrid capital via the ASX.
Based on the 3.89 per cent bank bill rate setting, the securities will pay an annual rate of between 6.9 per cent and 7.1 per cent, with distributions expected to be fully franked.
The margin also compares to a recent higher ranking tier two bond issued by ANZ last week, which paid wholesale investors a margin of 2.35 per cent over the bank rate.
In June 2030, the bank can elect to repay the securities. CBA is arranging the transaction and appointed ANZ, Bell Potter, Morgan Stanley, Morgans, National Australia Bank, Ord Minnett, Shaw, UBS and Westpac as lead managers on the sale.
Under new regulatory marketing restrictions, the securities can only be sold to an eligible client of a brokerage firm that has been appointed to syndicate the offer.
Credit rating agency S&P Global assigned a BBB- rating to the securities to reflect the subordinated status of the security.