Bloomberg News

Commerzbank’s Debut SME Covered Bonds Get Central Bank Support

February 22, 2013

Commerzbank AG (CBK)’s debut issue of European covered bonds backed by loans to small- and medium- sized companies attracted support from central banks.

Commerzbank said it sold 36 percent of its 500 million euros ($659 million) of five-year notes to central banks or agencies, with 28 percent going to asset managers and 27 percent to other lenders. German buyers accounted for 44 percent of all purchases, Commerzbank said.

Such a high participation by central banks is “unusual” for covered bond issues, with other deals this year typically selling about 5 percent to the public-sector institutions, said Ralf Burmeister, a Frankfurt-based fund manager at Deutsche Asset & Wealth Management, which oversees 944 billion euros.

Banks are starting to seek alternatives to the real estate and public-sector debt traditionally used to collateralize the securities pioneered in 18th century Prussia. They’re running out of these safer assets to package into covered bonds, a process hastened by the meltdown of Europe’s property market, and Fitch Ratings said at least two other lenders were preparing to follow Commerzbank with SME-backed issues.

Commerzbank said its covered bonds were twice subscribed, in spite of concern from investors including BlackRock Inc. (BLK:US), which said SME-backed deals risked devaluing the asset class. Pacific Investment Management Co. said the notes from Germany’s second-biggest bank may not qualify for benchmark indexes.

To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net

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


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • BLK
    (BlackRock Inc)
    • $318.62 USD
    • -2.24
    • -0.7%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus