Deutsche Bank boosts private dollar bond sale

Bloomberg

Less than a week after raising $3 billion in a private debt sale, Deutsche Bank AG returned for another $1.5 billion, offering a yield premium twice what it paid to borrow a year ago.
The German lender sold the debt to mostly the same investors who bought last week’s offering at a slightly lower premium of 290 basis points, according to a person with knowledge of the matter, who asked not to be identified because the information isn’t public. The premium on the Oct. 7 sale was 300 basis points and compares with 143 basis points in a public issue of similar notes in August 2015.
The deal was the first for Deutsche Bank since the U.S. Justice Department demanded $14 billion to settle claims that it misled investors over mortgage-backed securities before the American housing crisis. The claim has fueled concerns about the viability of the bank and its capital adequacy that have pushed the lender’s share price down more than 45 percent this year.
“The private debt sale shows they can still access the market for sizable term funding,” said Ben Sy, head of fixed income, currencies and commodities at the private banking arm of JPMorgan Chase & Co. in Hong Kong. Even so, “it has to pay a significant premium and that may shake confidence among investors,” he said.
Amy Chang, a media relations officer at Deutsche Bank in Hong Kong, said in an e-mail that she couldn’t immediately comment.

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The bonds will become more vulnerable to losses from Jan. 1, when a German law takes effect that subordinates existing notes to deposits, derivatives and structured notes. Senior bonds could be bailed in if post-tax losses exceed 20 billion euros or if some lower-ranking bonds don’t provide a cushion because they’re not governed by EU law, Hank Calenti, an analyst at Wells Fargo & Co. in London, wrote in a note to clients.
“Short term, it’s a good thing for Deutsche that they’re raising money even though they have to pay a higher spread than they want to,” said Jonathan Rochford, a Sydney-based portfolio manager at Narrow Road Capital, which manages A$35 million ($26.5 million). “It gives people confidence that they’re getting funding. But the long-term issues haven’t changed. They’re still undercapitalized.”
The $4.5 billion notes pay a coupon of 4.25 percent and are due in 2021, according to data compiled by Bloomberg.