NAB pulls $2bn hybrid raising as ongoing volatility rocks markets

National Australia Bank late on Thursday pulled a $1.95bn hybrid raising due to heightened volatility amid a wider market rout.

National Australia Bank late on Thursday pulled a $1.95bn hybrid raising due to heightened volatility amid a wider market rout.

After ASX-listed hybrids suffered a torrid trading session on Monday, NAB said it was withdrawing its Capital Notes 4 offer with market conditions changing substantially since it was launched on February 17.

“NAB recognises that market conditions have changed substantially since the offer was launched and that the ongoing market volatility would be likely to impact on the trading value of the NAB Capital Notes 4,” the bank said after the market closed.

The NAB notes were to start trading on March 24 at a 2.95 per cent margin with the proceeds of the offer to be used for general corporate purposes. Margins have jumped to 4.5 per cent in recent days due to distress in equity markets.

“NAB considers that the withdrawal of the offer is in the best interests of relevant stakeholders, including the large number of retail investors who had expressed interest in participating in the offer. Other options, including potential repricing, were not considered appropriate in the absence of an orderly market,” the bank said.

Hybrid notes, or capital notes, are part debt and part equity and reward investors with a higher rate than bank bonds or term deposits, due to the risk the financial instruments carry. Hybrid payments can be suspended in the event of a crisis and the value of the investment can be converted into shares or written off to zero.

In the hierarchy of capital, depositors are the first to get their money back in the event of a bank going insolvent. Senior creditors and bond holders are then paid, followed by subordinated note holders, hybrid capital holders and, lastly, shareholders.

NAB said investors who applied for NAB Capital Notes 4 through brokers should contact them to obtain their refund.

The offer was overseen by joint lead managers Morgan Stanley, Morgans, Ord Minnett, UBS and Westpac Institutional Bank.

Perry Williams