A £200 million deal doesn’t sound that impressive, certainly not impressive enough to justify a global award. But the deal, a subordinated issue at the end of May for US credit card company MBNA, sums up the progress Deutsche Bank has made in recent years.
Just three years ago Deutsche was something of an also-ran in the asset-backed securities market. It had a decent franchise in Europe, though one rather dependent on self-issuance, while its US operation was little more than a niche player.
So the bank got hold of its chequebook and lured away most of CSFB’s highly successful US asset-backed team, co-headed by Jorge Calderon and Phil Weingord.
Soon afterwards Calderon was promoted to global head of debt capital markets, and Weingord assumed full responsibility for asset-backed. Three years on it has become one of the predominant global ABS houses.
There aren’t many of them. Only Citigroup and JPMorgan could join Deutsche in claiming to have a broad franchise across the major asset classes in both the US and Europe.
The real battle has been between Citigroup and Deutsche Bank in terms of market share and leadership in innovation. Deutsche beats its rival in large part because of its European operations, where it is active in more countries and in more asset classes, and has been the chief structurer of more deals. “We’ve built a platform somewhat different to our competitors’,” says Weingord. “We have a single global group to cover trading, ABS, mortgages, CDOs, warehousing and conduits.”
That’s not to downplay its US operations. Deutsche is by no means a niche player in that market any more, fighting it out with both CSFB and Citigroup for the top spot. Among its key deals is a transaction for ANC Rentals, a car company that was in bankruptcy. Deutsche structured a novel transaction allowing it to use the ABS markets to raise its debtor-in-possession financing. It has also continued to invest in its US business: last year it decided to build a more comprehensive mortgage-backed securities business. In less than a year the firm has jumped from around seventeenth place in the league tables to seventh.
But let’s get back to that £200 million issue. As a deal it is rare in several respects. First, it’s highly unusual for a subordinated deal to have a 10-year maturity. “Most of them have an average life of three to five years,” says Michael Raynes, managing director and head of European ABS at Deutsche. “It’s one of the largest subordinated issues MBNA has ever done, it’s fixed rate, it’s got a triple-B rating and it’s one of few credit card subordinate sterling deals to come to market.”
The deal is also indicative of the way that the ABS markets in general are developing. More and more issuers are looking to tap non-domestic markets. The MBNA deal is one of the still rare examples, in recent months at least, of US issuers coming to Europe – although many, including MBNA have issued in euros and the predecessor currencies before that.
What these issuers need is a bank that is able to tap any market, and to be committed way beyond the underwriting process. Speaking at the inaugural American Securitization Forum annual meeting at the end of last month, MBNA’s CFO Vernon Wright stated that “the competition to underwrite deals in Europe is intense, but there is more of a reluctance to make secondary markets”. That is why the MBNA deal seems to add a vote of confidence to the platform Deutsche Bank has built on both sides of the Atlantic.
Deutsche’s intra-Europe business is perhaps the strongest of all the competitors, having done deals during the past year in 11 different countries and 10 different asset classes. Highlights include an innovative transaction for the Greek government. The e100 million deal securitized the state’s telecoms venture capital assets, with the state guaranteeing an interest component and principal. Investors essentially get to benefit from the upside of the portfolio.
The Match 1 transaction also raised a few eyebrows. It was a mortgage-backed deal that for the first time in Europe allowed prepayment risk to be transferred from the bank to the investor. But what really intrigued market participants was that the deal was done on behalf of ABN Amro, which has its own ABS group, and one that has done a pretty good job of late.
