SME-specialist neobank Judo has announced it will seek $75 million in Tier 1 capital as part of a long-standing strategy to “develop and diversify” its funding sources.
Judo said its first-ever capital notes offer is part of a long-planned capital management strategy, which was flagged within its FY23 results released in August, the bank said.
The issuing of capital notes, a type of hybrid security quoted and tradable on the Australian Securities Exchange (ASX), is, the bank said, consistent with Judo’s approach to proactively optimise its capital structure over time”.
Generating additional Tier 1 capital would also “improve the efficiency and diversification of Judo Bank’s capital base, in a manner consistent with Australian banking peers”.
Judo chair Peter Hodgson said the SME-specialist bank will use proceeds of capital notes to fund its regulatory capital requirements.
The capital notes offer will open to investors from 31 October, and comprises an institutional investor offer and a broker firm offer for wholesale and retail investors.
Barrenjoey Markets has been appointed joint lead manager for the offer, joined by E&P Corporate Advisory, Morgans Financial, and Westpac Institutional Bank.
The funding push follows the successful completion in September of Judo’s inaugural capital relief securitisation transaction.
The September funding program, an Australia first, was backed by a mix of SME-related loans, mortgages and credit lines, equipment loans and residential mortgages that qualify for regulatory capital relief.
Judo said that it had successfully priced the securitisation program to raise $500 million, which would be directed towards enhancing its common equity Tier 1 capital ratio.
Judo upped the target of the program to $500 million from the $350 million it had originally sought, noting it had received strong support from investors.
