SYDNEY: Commonwealth Bank of Australia on Tuesday launched a new AT1 hybrid security issue aiming to raise A$750 million ($508.7 million), the first from a major Australian bank since similar securities were written to zero during the Credit Suisse takeover.

The CommBank PERLS XVI issue will pay between 3% and 3.2% above the Bank Bill Swap Reference Rate with the first distributions due in September, according to a prospectus published on Tuesday.

The bank will use net proceeds to fund general business.

The issue by Australia’s biggest bank follows a A$1 billion issue by Japan’s Sumitomo Mitsui Financial Group in April as banks tentatively return to a market rocked during the government-brokered takeover of Credit Suisse by rival UBS Group AG in March.

The Swiss regulator ruled holders of more than $17 billion worth of Credit Suisse AT1s received nothing in the deal despite shareholders, who sit below bondholders on the priority ladder for repayment in a bankruptcy process, receiving over $3 billion.

CBA’s AT1s and the Credit Suisse instruments are “chalk and cheese”, said Nick Chaplin, a portfolio manager at BondAdviser.

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Conversion to equity is structured into the issue, which is overseen by Australia’s conservative prudential regulator.

“Australia has some of the most conservative capital rules in the world and these securities are from one of the most capitalised banks in the world,” he said.

Bank hybrid securities are popular in Australia, with lots of interest from retail investors drawn by higher yields.

The Assistant Treasurer in March said local rules would not allow a replay of what occurred in Switzerland.