“It came very close but you can’t just put any deal out there,” said one syndicate banker. “Anytime you reduce the deal size it’s difficult to get people to stick.”
Tuesday had started with the bookrunners giving a message that they were more than 80% covered on the base deal, which then consisted of 22.2m primary shares (to raise at least €400m) and 27.4m secondary shares from Terra Firma. The price range was €18-€21 a share.
Deals that aren’t covered at the start of the last day sometimes struggle to hold together but Deutsche Annington made further progress — just not enough.
At 1.30pm, investors were told that the deal would now consist of the same primary portion but only 13.8m secondary shares, which at the bottom of the range meant a deal size of €650m, plus the greenshoe.
A smaller deal though often means fewer and smaller orders from some investors.
And by the time books had closed, the company, shareholder Terra Firma and the lead managers had a deal that might have theoretically been allocateable, across base size and greenshoe, but not one in which there was confidence.
A lot of back and forth followed, with bankers weighing up the options, questioning whether they could allocate all the demand and worrying about how the deal might trade.
“It was so, so close,” said another banker.
It took well into the evening before a final announcement of postponement.
Most of the damage though had taken place earlier in the process. The FOMC taper talk episode of 10 days ago stopped what had been good momentum in its tracks. The performance of key comparable LEG Immobilien, down 4.2% since the price range announcement was crucial, since the residential real estate sector has — until now — been seen as a safe, non-volatile haven.
LEG traded down another 2% on Wednesday, showing just how tough a market Deutsche Annington would have debuted in had a deal been allocated.
The market ructions on Wednesday were symptomatic of a much more serious reversal of sentiment than had been apparent earlier in the process, said bankers, who sounded as downbeat as they had all year. Two emerging markets borrowers were set to announce their intentions to float next week but would now be advised not to.
It remains to be seen whether a recovery on Thursday — the FTSE 100 was up 3.1%, the EuroStoxx 50 up 2.9% and the DAX up 2.1% — on dovish Bank of England and ECB talk, is enough to change that advice.
JP Morgan and Morgan Stanley were joint global coordinators and joint bookrunners with Bank of America Merrill Lynch and Deutsche Bank. Berenberg and Kempen & Co were co-bookrunners. Commerzbank, Erste Group Bank and Société Générale were co-managers.