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any financial / banking guru here?
i need some help to digest this piece of news in layman terms:
(re-deeming off Tier2 sub-debt will improve the Ratio, but how does this impact the Bank positively?
would the bank be more "healthy" on paper if T1 is > T2 ?)
TIA!
http://sg.news.yahoo.com/rtrs/20090403/tbs-macquarie-bonds-7318940.html
Macquarie launches $350 mln sub debt buyback-source
SYDNEY, April 3 - Australia's Macquarie Bank <MQG.AX> plans to buy back up to $350 million of subordinated debt to improve its Tier 1 capital ratio, a source familiar with the offer said on Friday.
Macquarie is offering to buy back the bonds well below par, at a price of 50 to 60 cents per dollar, the source said, but higher than their trading range 30-40 cents prior to the offer.
These types of bonds are usually paid back at par at the call date, and almost never reach maturity.
The sub debt, or lower Tier 2, initially issued in 2005, matures in 2015 but is callable on Sept. 18, 2010.
The source declined to be identified because he was not authorised to speak publicly about the offer.
The bank's parent, Macquarie Group, did not immediately reply to phone messages seeking comment.
Investors are increasingly worried that some banks could be tempted to roll over their debt, rather than pay it back at the call date as is usual, leaving holders stuck with far longer maturities than they initially thought.
South Korea's Woori Bank shocked investors in February when it decided not to recall $400 million of sub debt. Some fear Macquarie could be tempted to follow the same path, although no Australian bank has dared to do so so far.
Although investors would loose some of their initial investment if they sold their bonds back now, they would also gain certainty, a trader said.
Tier 1 and Tier 2 are forms of capital that banks are required to maintain as a cushion to protect bank deposits.
Macquarie's sub debt is rated A minus by S&P and A2 by Moody's.
The tender expires on April 8 with results to be announced on April 9. Settlement is expected on April 16.
HSBC and Royal Bank of Scotland are jointly arranging the buyback. (Reporting by Cecile Lefort; Editing by Wayne Cole and Mark Bendeich)
i need some help to digest this piece of news in layman terms:
(re-deeming off Tier2 sub-debt will improve the Ratio, but how does this impact the Bank positively?
would the bank be more "healthy" on paper if T1 is > T2 ?)
TIA!
http://sg.news.yahoo.com/rtrs/20090403/tbs-macquarie-bonds-7318940.html
Macquarie launches $350 mln sub debt buyback-source
SYDNEY, April 3 - Australia's Macquarie Bank <MQG.AX> plans to buy back up to $350 million of subordinated debt to improve its Tier 1 capital ratio, a source familiar with the offer said on Friday.
Macquarie is offering to buy back the bonds well below par, at a price of 50 to 60 cents per dollar, the source said, but higher than their trading range 30-40 cents prior to the offer.
These types of bonds are usually paid back at par at the call date, and almost never reach maturity.
The sub debt, or lower Tier 2, initially issued in 2005, matures in 2015 but is callable on Sept. 18, 2010.
The source declined to be identified because he was not authorised to speak publicly about the offer.
The bank's parent, Macquarie Group, did not immediately reply to phone messages seeking comment.
Investors are increasingly worried that some banks could be tempted to roll over their debt, rather than pay it back at the call date as is usual, leaving holders stuck with far longer maturities than they initially thought.
South Korea's Woori Bank shocked investors in February when it decided not to recall $400 million of sub debt. Some fear Macquarie could be tempted to follow the same path, although no Australian bank has dared to do so so far.
Although investors would loose some of their initial investment if they sold their bonds back now, they would also gain certainty, a trader said.
Tier 1 and Tier 2 are forms of capital that banks are required to maintain as a cushion to protect bank deposits.
Macquarie's sub debt is rated A minus by S&P and A2 by Moody's.
The tender expires on April 8 with results to be announced on April 9. Settlement is expected on April 16.
HSBC and Royal Bank of Scotland are jointly arranging the buyback. (Reporting by Cecile Lefort; Editing by Wayne Cole and Mark Bendeich)
