Deutsche Genossenschaftsbank is pricing a EUR1 billion (USD877 million) synthetic securitization of loans to hit the market in the first 10 days of August. Joerg Huber, head of syndication in Frankfurt, said the portfolio consists of loans to small and medium sized companies refinanced by German credit agency KfW. The transaction is part of a long line of similar deals issued after KfW announced its intention to support the transaction in December (DW, 12/24). Huber is not deterred by bringing a EUR1 billion deal to the market during prime vacation time. He said he has already received a lot of demand for the CDO from DG's cooperative banks and European institutions and it only started pricing Thursday.
Five tranches of credit-linked notes, totaling EUR100 million, will be marketed to investors with the rest of the transaction being sold as a credit default swap. Huber said the first loss tranche will not be marketed but declined comment on whether DG Bank will hold on to it. Fitch, Moody's Investors Service and Standard & Poor's rated all the tranches. Triple A-rated notes account for EUR35 million of the notes and will pay investors 27 basis points-30bps over three-month Euribor. A EUR14 million tranche rated Aa2/AA/AA will pay 48bps-51bps, and a EUR17 million A2/A/A will pay 68bps-72bps. There is also a EUR10 million Baa1/BBB plus/BBB plus tranche, which pays 143bps-153bps and a EUR16 million Ba1/BB plus/BB plus tranche, which pays 350bps-400bps.
In the transaction a special purpose vehicle, named Promise-Z, sells DG Bank protection via credit default swaps referenced to the portfolio of loans. The spv simultaneously issues the credit-linked notes and the credit default swaps to investors. The transaction is being lead managed by DG Bank.
