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Westpac completes $2 billion institutional share placement

The Westpac Banking Corp (ASX: WBC) share price will be on watch this morning when it returns from its trading halt.

Why was Westpac in a trading halt?

Westpac requested a trading halt on Monday so it could launch a $2.5 billion capital raising. This comprised a fully underwritten $2 billion institutional share placement and a non-underwritten share purchase plan aiming to raise approximately $500 million.

Westpac is raising these funds to provide an increased buffer above APRA’s unquestionably strong CET1 capital ratio benchmark of 10.5%. It is also expected to provide flexibility for changes in capital rules and for potential litigation or regulatory action.

Institutional share placement.

This morning Westpac announced the successful completion of the institutional component of its capital raising.

According to the release, a total of 79 million new shares have been placed with sophisticated and institutional investors at a price of $25.32 per share. This is a discount of 9.2% to its last close price. Though, these shares won’t be eligible for Westpac’s final 80 cents per share dividend.

These new shares are expected to settle on November 7 and then commence trading on the ASX on November 8.

What now?

Westpac will now push ahead with its non-underwritten share purchase plan to raise a further $500 million.

The issue price for the share purchase plan shares is a little more complex. It will be the lesser of the placement price and the VWAP of Westpac shares traded on the ASX during the five trading days up to, and including, the close date of December 2, less a 2% discount and rounded to the nearest cent.

Further details relating to the share purchase plan is expected to be sent to eligible shareholders on November 12.

Incidentally, this morning analysts at Goldman Sachs retained their neutral rating and trimmed the price target on the bank’s shares to $28.42. It appears pleased that Westpac’s capital issue has now been addressed.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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