Wed May 7, 2014 12:34pm EDT
* Total AT1 raise to be less than 5bn
* Deutsche to stagger call dates on dollar, euro and sterling tranches
* Potential Yankee considered further down the line
* Liability management on old-style Tier 1 not ruled out
By Helene Durand
LONDON, May 7 (IFR) - Deutsche Bank gave further details on the size and shape of its inaugural Additional Tier 1 issue on Wednesday during an investor call, also signalling that it may venture into the US dollar onshore market in the future.
Jonathan Blake, global head of debt issuance at the German bank, said the lender would not issue the whole 5bn it is targeting to raise eventually, even if there is very strong investor demand.
Inaugural Additional Tier 1 issues from the likes of Santander or KBC have enjoyed high levels of oversubscription and expectations are that Deutsche, which has been in the pipeline for over a year, will also garner strong demand.
Deutsche has said that it intends to raise about 5bn of CDR IV-compliant AT1 by the end of 2015. Blake also reiterated that the 1.5bn flagged in the release last week was very much a floor for the deal and not its maximum size.
Deutsche Bank is eyeing a range of call dates for the multi-currency trade that will include bonds denominated in US dollars, euros and sterling sold under the Reg S format. "We want to stagger the calls," Deutsche said on the call.
The issuer is eyeing a perpetual non-call six-year for the dollar tranche, a perpetual non-call seven or eight-year for the euro tranche and a perpetual non-call 10 or 12-year for the sterling tranche, although the final call dates will be decided on the back of investor feedback.
Blake also said that while the US dollar tranche was targeted at European and Asian investors because of the Reg S format, the bank may return to the Additional Tier 1 market in the future with a Yankee dollar offering.
As well as broadly outlining the details of the deal, Deutsche Bank said it would consider liability management exercises on old-style hybrid Tier 1 debt, similar to what Lloyds did in March.
The UK lender exchanged £4.4bn-equivalent of high-yielding capital notes for £4.4bn worth of high-risk Additional Tier 1 bonds.
"We could look at a potential exchange, but for technical reasons we couldn't do it in this particular case," Blake said. "The details of the shareholder authorisation limits our ability to conduct an exchange, but we wouldn't rule that out for future transactions."
Asked whether Deutsche Bank would use its ability to exercise regulatory calls in the future, Blake said he could not give a black and white answer.
The possibility of bonds being called at par for loss of regulatory treatment was the main stick used by Lloyds to motivate bondholders to part with their higher yielding instruments.
"Although optically the coupons look high, this doesn't give a full picture of the true cost and the after-swap cost of these can still be quite attractive," said Blake.
The transaction is expected to launch next week. (Reporting by Helene Durand; Editing by Sudip Roy, Philip Wright)
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