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Commonwealth Bank of Australia cut the size and price of a stock offer after its initial bid to replenish capital was scuppered by rising bad debt.
UBS will arrange the sale of A$1.65 billion ($1.98 billion) in new shares to institutions at A$26 apiece, a 10.8 per cent discount to the last traded price, according to a copy of the term sheet.
Commonwealth told the stock exchange on Tuesday it had sold A$2 billion in shares at A$27 each through Merrill Lynch.
Commonwealth was forced to abandon that sale after announcing its bad debts would be higher than previously forecast, prompting Merrill Lynch to walk away from the deal, the Sydney Morning Herald reported.
Commonwealth yesterday had its shares suspended from trading pending a statement.
Commonwealth Bank, which owns ASB Bank in New Zealand, is led by New Zealander Ralph Norris.
"They obviously made a massive mistake," said Angus Gluskie, who manages about A$367 million at White Funds Management and was among investors approached by UBS. "The bad debts would clearly have been flagged ahead of the issue. It's a short-term blotch on their management of this process."
Commonwealth said it expected bad debts to rise to 0.6 per cent of total loans, compared with a November 13 forecast of as much as 0.5 per cent.
Australian banks have raised more than A$10 billion in share sales in the past six months as they seek to prepare for rising credit costs in a slowing economy. Commonwealth said last month bad debts might double this year.
- BLOOMBERG
