mi riportano una possibile emissione AT1 di DBK per 5 Bln
March 25, 2014 6:08 pm
Deutsche Bank leads wave of ‘coco’ issuance
By Christopher Thompson and Daniel Schäfer in London and Ben McLannahan in Tokyo
©Bloomberg
German and Japanese financial groups are currently preparing to issue maiden “coco” bonds as a growing number of banks worldwide seek to test investors’ ­hunger for the high-risk, high-yield debt in order to meet rules on capital.
Germany’s
Deutsche Bank is preparing about €5bn of contingent convertible, or coco, bonds once it receives final approval from the country’s finance ministry while Japan’s
Mizuho Financial Group is set to launch a $1.5bn bond later this week.
The bonds would boost both banks capital buffers. Global bank regulators require a 3 per cent ­minimum of capital to loa ns and other assets.
Deutsche’s additional tier one offering would either convert to equity or write down completely once the bank breaches a pre-agreed capital threshold.
Stefan Krause, Deutsche’s chief financial officer, has said in the past that the bank plans to issue €5bn additional tier one capital by the end of next year, pending the regulatory approval to do so.
Germany is one of Europe’s last big coco markets yet to be tapped.
The sticking point had been whether coco coupon payments would be tax deductible – and this could still delay Deutsche’s first issue, people close to the situation said.
Meanwhile, Mizuho’s 10-year bond will offer a high fixed coupon of 4.6 per cent but will be instantly and permanently written down to zero if Japan’s government deems the bank ­insolvent either before a recapitalisation or the start of bankruptcy proceedings.
That means creditors are more likely to take losses than they would in a traditional bankruptcy, in which courts have discretion over write-offs.
Other Japanese banks are expected to follow suit in issuing the debt, which can be counted as tier two capital under Basel III rules.
Sumitomo Mitsui Financial Group, the third-biggest Japanese banking group by assets, said that it was planning a sale of dollar-denominated bonds with similar features.
Most global coco issuance over the past year has come from UK, Swiss, Spanish, Italian and French banks.
In spite of the risks posed to creditors, investors have lapped them up due to cocos’ relatively high yields on investment grade names.
They are also popular with regulators because they allow investors to be bailed-in to a failing bank thus decreasing the need for a taxpayer bailout.
European coco issuance is expected to be €30bn-€50bn this year, the highest ever, as the region’s banks try to boost their capital levels ahead of regulators’ stress tests later this year.
Last month Standard & Poor’s announced plans to cut ratings on some cocos that it said were much riskier than first thought.
That move came in the wake of concerns raised by the Bank of England late last year that coco investors were mispricing the risks of being converted.
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