• 30 May 2012
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Type of deal: Debt for equity exchangeDeal: €626mDate of pricing: January 2011Joint leads: Credit Suisse, Citi, UBS

Liability management has boomed as a tool for Europe’s financial institutions since the onset of the financial crisis. Banks have managed their maturity profiles by swapping short dated paper for longer notes.

They have used liability management to give investors an exit option on callable securities as they opt for economic call policies. And, in the largest measure, they have used it to increase equity capital. Most commonly, that has been through buying back hybrid capital securities — which will see their regulatory capital benefit run down in the coming years — well below par.

But among the wave of bank liability management deals that have been offered to investors in recent years, Commerzbank’s innovative debt for equity exchange is one that particularly stands out.

The deal came at the beginning of a concerted effort by the bank to improve its capital ratios and rid itself of sovereign support. And the execution of it impressed.

Commerzbank conducted the deal in two stages. First, it used an accelerated bookbuild to raise equity. That brought in €626m. Then it used the cash to launch a tender offer for trust preferred securities that were trading at deep
discounts to par. Five securities totalling €3bn were eligible for the buyback, at between 48% and 71.5% of par value.

The two stage process was novel — Commerzbank used the format in a bid to avoid triggering dividend stoppers and pushers on the hybrid securities.

The deal added 40bp to Commerbank’s capital ratio, but for the bank it was just the beginning. Later in the year, it raised €5.7bn through the issue of conditional mandatory exchangeable notes (CoMens). After seeking shareholder approval, it flicked those into equity.

And with that on the balance sheet, Commerzbank was able launch a more conventional rights issue in May 2011, bringing in €5.3bn of fresh equity. All up, not a bad effort for a bank that had taken billions of euros of state aid during the worst of the crisis: these efforts allowed it to repay €14.3bn of silent participations.

Taking out the trust preferred securities picked up on a growing regulatory trend of favouring common equity capital over hybrid capital. As the year progressed, growing numbers of European FIG borrowers turned to liability management to shore up their capital bases. For most, straight buybacks of hybrid capital were the order of the day. The low trading prices in secondary markets in
the fourth quarter made buybacks irresistible for many borrowers.

But Commerzbank’s trade really tested the boundaries of the traditional realm of liability management, and proved that innovation can pay off.
  • 30 May 2012

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Oct 2016
1 JPMorgan 310,048.18 1328 8.75%
2 Citi 285,934.48 1059 8.07%
3 Barclays 258,057.88 833 7.29%
4 Bank of America Merrill Lynch 248,459.06 911 7.01%
5 HSBC 218,245.86 884 6.16%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 29,669.98 55 6.95%
2 UniCredit 28,692.62 136 6.73%
3 BNP Paribas 28,431.90 139 6.66%
4 HSBC 22,935.49 112 5.38%
5 ING 18,645.88 118 4.37%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 14,593.71 79 10.38%
2 Goldman Sachs 11,713.19 63 8.33%
3 Morgan Stanley 9,435.23 48 6.71%
4 Bank of America Merrill Lynch 9,019.27 40 6.41%
5 UBS 8,763.73 42 6.23%