Deutsche Bank has declined to call one of its bonds — again. Only this time, it was a Tier 1 hybrid bond instead of Lower Tier 2 and the market “expected it”.
FRANKFURT/LONDON, June 2 (Reuters) – Germany’s top lender, Deutsche Bank AG, said it would not redeem a $650 million Tier 1 hybrid bond at its end-June call date, which analysts said was expected given the high cost of replacing it.
Deutsche Bank surprised the market in mid-December when it was the first big bank to say it would not redeem a subordinated bond — 1 billion euros of Lower Tier 2 bonds due January 2014. The move led to a sharp widening in subordinated bank bonds across Europe.
Credit analysts at Royal Bank of Scotland said in a note that Deutsche Bank could not currently issue replacement Tier 1 capital at anything like economic levels.
Deciding not to call is “a manifestly logical course of action for issuers to take, especially in the context of having capacity to issue economic replacement capital,” they added.
This week’s similar decision came as no great surprise, said Jeroen van den Broek, head of investment grade credit strategy at ING.
A Deutsche Bank spokesman would not comment on whether the bank would continue to skip opportunities to call the bond, a perpetual issue with a coupon of 7.872 percent.
The spokesman said the fact this instrument was trading below par showed the market did not expect it to be called.
Nice.
Related links:
Deutsche rattles the bond market – FT Alphaville
Of Deutsche bonds and conspiracies – FT Alphaville