Deutsche Bank bond drives $1.1m in fees to diverse shops

Bloomberg

Deutsche Bank AG paid one of the largest fee shares ever to banks managed by women, minorities and veterans for helping oversee its bond sale, as diverse firms take on more significant roles in debt offerings.
Over 60% of the deal’s fees, or about $1.1 million, were split among a group of 11 banks including joint lead managers Academy Securities, CastleOak Securities, Loop Capital Markets, Mischler Financial Group, R Seelaus & Co. and Siebert Williams Shank, according to a Deutsche Bank spokesman and the transaction’s offering documents. That compares to an industry average of 20% or less in recent years for diverse firms, which have tended to serve mostly in lower paying co-manager roles.
“This is very indicative of the trajectory of ascending roles for diversity and inclusion firms,” said Spencer Wilcox, a Navy veteran who now serves as Academy’s head of debt capital markets. “We’re graduating past these ancillary roles.”
Banks with diverse ownership have been making inroads in the US corporate bond market, which has long been dominated by the likes of JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. Companies are increasingly factoring in diversity and inclusion goals into their capital markets activities, especially in the wake of racial justice protests that swept the US last year.
Deutsche Bank issued $750 million of bonds on March 30 through its New York branch, and the deal settled on April 1. The four-year senior non-preferred notes, which can’t be bought back for three years, priced at a spread of 112.5 basis points over Treasuries, a minimal concession to its outstanding debt.

As joint lead managers, the diverse firms were included in every aspect of the transaction, from calls to determine when the deal would move forward, to building orders with investors and pricing, said Jeanmarie Genirs, head of U.S. investment-grade syndicate at Deutsche Bank.

“We sat around a virtual table to figure out how we could make a difference in terms of really trying to increase diversity and inclusion on Wall Street,” Genirs said. “You can always pay out more money, but the other important part was to help raise their profile with investors and issuers.”

Diverse firms not only pride themselves on their social missions, but also tend to cater to investors with backgrounds similar to their own, which helps issuers distribute bonds across a wider swath of the market.

By being in on meetings to determine if a transaction will move forward, known as go-no-go calls, the diverse firms got a closer view of the discretion that issuers use in timing their transactions, Academy’s Wilcox said. That was especially valuable given the backdrop earlier this week, when of some of the world’s biggest banks reported significant losses tied to the implosion of Archegos Capital Management. The offering from Deutsche Bank, which managed to sidestep much of the tumult, likely would have gone on Monday, but was held until Tuesday to allow the market to process the headlines, Genirs said.