Banks to go global with hybrids after tax ruling

Christopher Joye

Coolabah Capital

In The AFR today I report a game-changing development for the major banks' ASX listed hybrid capital market: the ATO has delivered ANZ a private binding ruling (PBR) that allows them to stream (or not use) franking credits when issuing hybrid capital securities overseas that reduces the interest costs of these transactions by approximately 30%. The majors have not issued a hybrid overseas for almost a decade. This is because in 2008 the ATO stopped providing PBRs allowing them to get around the prohibition in Section 215-10 of the Income Tax Assessment Act on streaming (or the selective use of) franking credits. Overseas investors don't get the benefit of 30% franking credits, which means that banks have to increase the cash yield on hybrids significantly beyond what they pay on Australian products to get a foreign deal done. The ATO's willingness to furnish PBRs again has allowed ANZ to launch the first Aussie bank AT1 deal into the US dollar market since 2008. Free (VIEW LINK)


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Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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