The Australian Securities & Investments Commission expects that strong investor demand for hybrid securities will continue in Australia. This suggests that companies with a strong brand or reputation may wish to consider an issue of hybrid securities in Australia when analysing their capital requirements and funding options (particularly given the beneficial accounting and tax treatment associated with properly structured hybrid securities).
ASIC released its "Report 365 - Hybrid Securities" on 20 August 2013 which discusses recent offers of hybrid securities (ie. subordinated notes, capital notes and convertible preference shares) in Australia.
Click here to view the report
The report highlights that more than A$18 billion has been raised by banks and companies during the 20 months to June 2013 (including an issue of A$300m Subordinated Notes by Healthscope Group in March 2013).
In light of the increased issuance and popularity of hybrid securities in the Australian market, ASIC has been focused on ensuring the adequacy of the prospectus disclosure and the accuracy of the selling messages for hybrid securities because retail investors (predominantly self managed superannuation funds) are the key participants in the Australian hybrid securities market. The report sets out ASIC's findings on those matters arising from its:
- engagement with issuers of hybrid securities through reviewing and commenting on draft prospectuses; and
- targeted review of the selling methods adopted in respect of hybrid securities.