Westpac's hybrid looks like dud equities for dummies

Christopher Joye

Coolabah Capital

In The AFR today I argue that Westpac's mooted $750m plus hybrid offer looks like a real dud that will be yet another "equity for dummies" deal. Why buy perpetual, non-voting equity in Westpac on what appears to be a current maximum 6.15% return when you can get Westpac's ordinary shares with full voting rights paying a grossed-up dividend yield of 7.6% (plus much greater potential capital upside)? This is very cheap Tier 1 equity capital for Westpac, which is tautologically an expensive deal for investors. So it will be interesting to see whether the private bankers, financial planners and stockbrokers pumping this stuff to mums and dads have learnt any lessons from the parlous performance of the banks' hybrid securities. This has been exemplified by the 6% to 9% capital losses suffered by investors in CBA's $3 billion Perls VII (ASX: CBAPD) hybrid issue last year. There are winners from this hybrid deal (if it goes ahead), and that includes anyone sitting higher up the capital structure. Read column for free clicking twice here (VIEW LINK)

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Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs over $8 billion with a team of 40 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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