Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are having a bit of an off day.
In afternoon trade, the banking giant's shares are down 0.7% to $28.00.
What's going on?
This afternoon the banking giant announced the offer of a new Additional Tier 1 Capital security, ANZ Capital Notes 7. This notes offering is aiming to raise $1 billion, but also has the option to raise more or less.
In conjunction with the offering, the bank intends to redeem its ANZ Capital Notes 2 on 24 March 2022. The proceeds from the new offer will go towards that redemption and also for general corporate purposes.
ANZ Capital Notes 7
The ANZ Capital Notes 7 are fully paid, convertible, perpetual, unsecured, subordinated notes. Distributions on these notes are payable quarterly in arrears and in cash based on a floating rate and are non-cumulative.
This is subject to a payment condition not existing and is at ANZ's absolute discretion. Payment conditions include the distribution not resulting in ANZ's CET1 ratio falling below required levels or APRA objecting to the payment.
These distributions are expected to be franked at the same rate as its dividends. However, if a distribution is not fully franked, ANZ will pay an additional amount in cash to compensate holders for the unfranked component.
After which, ANZ Capital Notes 7 will ultimately convert into shares on 20 September 2031, unless they are converted, redeemed or resold earlier.
What about ANZ shares? Are they a buy?
If you're more interested in ANZ's shares than its capital notes, then the good news is that one leading broker sees value in them at the current level.
According to a recent note out of Goldman Sachs, its analysts have retained their buy rating and with a $30.84 price target.
Based on the current ANZ share price of $28.00, this implies potential upside of 10% for investors. And if you include the $1.46 per share fully franked dividend Goldman expects in FY 2022, this total return increases to 15.5%.
