CommBank PERLS VII Capital Notes: Storm clouds brewing?

Key Points PERLS VII are a replica of recent Westpac and ANZ Capital Notes 2 offers Lowest margin of all Tier 1 convertible hybrids to date Recent media discussions should give investors extra cause for concern Commonwealth’s grossed-up for franking) is closer to 5% than 6%. This makes our ‘no hybrid’ argument (see margin to maturity for notes purchased today is a lot lower – about 2.6%. Importantly, they were also issued when the Commonwealth Bank share price was $56, so they’ve got a much lower Issue Date VWAP. This means there’s less chance that the Conversion Conditions won’t...

Commonwealth’s grossed-up for franking) is closer to 5% than 6%. This makes our ‘no hybrid’ argument (see margin to maturity for notes purchased today is a lot lower – about 2.6%. Importantly, they were also issued when the Commonwealth Bank share price was $56, so they’ve got a much lower Issue Date VWAP.

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