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Deutsche Bank finds window to launch AT1 into a volatile market

A second large AT1 deal this year shows increased investor confidence around the bank’s transformation, but timing the deal was tricky.

Photo: Reuters

November 23 was settlement day for the €1.25 billion perpetual non-call five additional tier-1 (AT1) transaction that Deutsche Bank sold into a jumpy capital market the previous Monday.

Coming after a couple of months of heightened rates volatility on fears of rising inflation had kept AT1 issuers out of the primary market, the deal attracted €2.3 billion of demand and priced, as almost every deal always does, inside initial price guidance for a coupon of 4.75%, paying instead just 4.5%.

However, even after a recent ratings upgrade, Deutsche still had to offer a new issue premium of around 30 basis points.

Euromoney checks in with Jonathan Blake, head of issuance and securitization at Deutsche, who confirms: “It achieved our objectives for size and price. Most investors viewed fair value at between 4.15% and 4.25%, after adjusting for the tighter back-end spread compared to our outstanding capital instruments. It needed that new issue concession given the rates volatility and market backdrop.”

If the bank does not call the transaction, the coupon resets to 4.552% over the interpolated mid-swap rate. It was the bank’s second AT1 deal of 2021, coming after a perpetual non-call six and a half-year transaction in May, also for €1.25

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