Guarantor: Deutsche Bahn AG
Maturity: November 23, 2016
Issue/re-offer price: 99.714
Spread at re-offer: 16bp over mid-swaps; 42.4bp over the 4.25% July 2014 Bund
Launched: Wednesday November 10
Joint books: Dresdner Kleinwort Wasserstein, Royal Bank of Scotland, WestLB
DrKW ? We were mandated on Tuesday morning and went out at midday at price guidance of 15bp-17bp over mid-swaps. We priced the deal 24 hours later at 16bp over mid-swaps, which reflected fair value against the Deutsche Bahn curve. The 2012s were 12bp bid, the 2013s were 13bp bid and the 2016s 15bp bid.
We were just short of the Eu500m and the bonds were at re-offer when freed to trade. This is a current coupon bond, which was priced at par, a lot of the issuer's outstanding bonds trade well above par.
France took 40%, the UK 21%, Germany and Italy each 7%. There was strong interest from insurance companies which took 50%, banks 30% and funds 20%.
RBS ? Deutsche Bahn is a company that comes quickly to the market and it does regular investor updates on an ongoing basis. Investors are familiar with the name and its stable Aa1/AA rating places it very firmly in the high quality bracket.
The company has 2010s, 2012s, 2013s, 2015s and 2018s outstanding and a 10 or 12 year issue suited the issuer best. Deutsche Bahn opted for the longer of the two as it offers investors that extra yield. We felt the extra 16 months duration was what insurance company money wanted.
We went out with a benchmark deal at 15bp-17bp over mid-swaps, which was spot-on in the context of secondary spreads.
The 2013s were at 17bp/12bp on an asset swap basis, the 2015s were at 12bp/7bp and the 2018s were at 18bp/14bp.
We priced the bonds in the mid-range at 16bp over and we were about three quarters subscribed. That is the nature of this type of deal and the bonds will sell down over time as movements in the Bund bring in more buyers.
France was the leader of the pack with 40%, the UK took 21%, Germany and Italy each 7%. By investor type, insurance companies were the largest takers, banks 30% and funds 20%.
The bonds are stable at re-offer in the secondary market.
WestLB ? There were limited windows available in November with the US election, various holidays and interest rate decisions due.
The issuer wanted to come to the market and the trade went quickly once we decided to take advantage of the available window at the beginning of the week.
The company comes to the market every year with a benchmark deal. We decided on the 12 year maturity as investors were looking for high quality paper.
This trade offered investors a pick-up against domestic state owned companies which tend to be guaranteed ? although Deutsche Bahn is state owned, it is not state guaranteed.
We went out on Tuesday lunchtime with price guidance of 15bp-17bp over mid-swaps and priced the deal at the midpoint in order to ensure aftermarket performance.
There was strong demand from investors outside of Germany with France taking 40%, the UK 21%, Italy and Germany each with 7%. The bulk of the bonds were bought by insurance companies.
The bonds are stable in the aftermarket and we did not expect heavy trading in the bonds as they were sold largely to buy and hold accounts.
?...this looked like a nice trade. The book wasn't fully subscribed but I would expect the bonds to sell down pretty quickly. There is certainly a need for high quality paper in longer maturities from insurance companies.?