Bloomberg News

Deutsche Bank’s $2 Billion Bond Sale Ends Lenders’ Drought

September 29, 2011

(Adds transaction is completed in first paragraph.)

Sept. 29 (Bloomberg) -- Deutsche Bank AG raised 1.5 billion euros ($2 billion) from the first sale of public, senior unsecured bonds by a European lender in more than two months, the longest period on record without a deal.

Germany’s biggest bank priced the floating-rate notes due October 2013 today at a yield of 98 basis points more than the three-month euro interbank offered rate, according to data compiled by Bloomberg. Deutsche Bank paid a spread of 40 basis points to issue two-year securities in February.

“Given the pricing, they probably swallowed a bit before doing it,” said Roger Doig, a London-based analyst at Schroders Plc, which manages the equivalent of about $58 billion in fixed- income assets. “They have a strong investor base domestically and their name is the same as the strongest country in the euro zone. That all helps.”

European lenders’ access to the bond market has been hampered as Greece’s flirtation with default worsened the euro- region sovereign debt crisis. The last non-state-owned bank to issue a similar public benchmark bond was UniCredit SpA, Italy’s biggest lender, which sold 1 billion euros of November 2012 floating-rate notes July 13, according to data compiled by Bloomberg.

Speculation policy makers are getting to grips with the crisis thawed credit markets this week and paved the way for Deutsche Bank’s deal. German lawmakers backed an expansion of the euro-area rescue fund today.

Spread Narrows

The extra yield investors demand to hold bank bonds instead of benchmark government debt fell to 3.39 percentage points from a record 3.51 percentage points on Sept. 26, according to Barclays Capital’s Euro Aggregate Banking Senior Index.

The Markit iTraxx Financial Index of credit-default swaps linked to the senior debt of 25 European banks and insurers fell three basis points to 263, according to JPMorgan Chase & Co. The gauge dropped from 282 basis points at the end of last week.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

Deutsche Bank raised 118.6 million euros by selling floating-rate notes to domestic investors in July, paying no premium to Euribor, data compiled by Bloomberg show. The Frankfurt-based lender managed the new transaction itself, the data show.

“It’s the kind of deal that can come in a very difficult environment,” said Roger Francis, an analyst at Mizuho International Plc in London. “If it’s the start of a trend all the better.”

--With assistance from Esteban Duarte in Madrid. Editors: Paul Armstrong, Michael Shanahan

To contact the reporters on this story: John Glover in London at johnglover@bloomberg.net; Ben Martin in London at bmartin38@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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