Rentenbank Landwirtschaftliche (Rentenbank) is having a good year. It is the third largest issuer of public bank CP in 2001 and now MTNWeek's best new CP borrower. And according to David Castle, head of short-term fixed income trading at Citibank, the issuer can do no wrong. He says: "Rentenbank is one of the most successful issuers we have seen. It would be very surprising to see a more accomplished debutante come to the European CP market." The issuer is quick to attribute its success. Horst Reinhardt, treasurer at Rentenbank, says: "The ECP market is investor driven. We therefore offer a high degree of flexibility in terms of currency, size and maturity of the paper we issue. We show a continuous presence in the market and respond to investors' demand for our paper, even if certain transactions do not perfectly fit our needs. That gives us credibility with dealers and investors." And their methods seem to have worked. The bank signed its euro5 billion ($4.51 billion) CP shelf in February 2000 and issued euro9.1 billion in that year. But it was not always easy. Rentenbank's programme does not contain the explicit state guarantee enjoyed by its competitor, KfW. And Jan Wipplinger, ECP trader at Deutsche Bank, believes that this made the facility quite tricky to market. He says: "It was a little difficult to market the facility in the beginning and it took a while to get going. The shelf saw activity after the first or second month. An issuer like KfW is easier to explain to investors because of its direct guarantee but the guarantee Rentenbank holds is very exclusive to Germany and as such it is a little harder to explain." But this has not troubled Rentenbank. Castle, at Citibank, believes the issuer's decision to bide its time at the start was an important factor in its first year's achievement. He says: "Their success can be pinned on the fact that they took a lot of time out to establish the approach that they should take and the correct levels that they should be posting. They are currently reaping the benefits of this approach. They have been able to tap into a group of investors that were looking for triple-A paper but not necessarily one with straight sovereign paper." Reinhardt, at Rentenbank, agrees. He says: "We spent quite some time analyzing the market before we started issuing. It was crucial to find out where we could position ourselves compared to our peers, namely KfW. We discussed our target levels with the dealers and made sure that our credit story was fully understood by them and communicated to investors accordingly. This allowed us to be consistent and transparent in our quotes from the very beginning." Rentenbank's CP programme runs alongside its $25 billion Euro-MTN programme, which it set up in 1994. The triple-A rated programme has $17.56 billion outstanding off 173 issues and has been used for 11 trades so far this year. Despite the high level of activity off the programme Reinhardt, at Rentenbank, believes there was more than enough scope to introduce its CP facility. He says: "Buyers of our CP are different from those that already bought our Euro-MTN debt. This is a very positive point as it means that the CP facility gives us access to a completely new investor base. Since March 2000 our investor base has widened continuously. Our shelf regularly ranks top five in terms of outstandings among all Euro-CP programmes." But Reinhardt does have some complaints. Although the issuer has singled out Barclays Capital, Citibank, Deutsche Bank and UBS Warburg for praise, claiming that they have been responsible for more than 90% of trades off the CP programme, it is not completely happy with its other dealers. The issuer claims it does not have immediate plans to update its facility but changes could come soon. Reinhardt says: "We have been very satisfied by the performance of the dealers in total. Although not all houses are performing equally well, we have no imminent plans to make major changes. We feel that reliability and stability is not only an important feature for investors, but also for the dealer group. We expect our dealers to reward this with a continued commitment to the programme. All dealers are key players in the CP market and we expect some of them to improve their performance over time." The bank has issued in tenors ranging from 24 to 365 days and tickets from $15 million to $900 million. It has issued in four different currencies but has a preference for dollar trades. Wipplinger, at Deutsche Bank, explains this trend. He says: "Sovereigns form a large proportion of Rentenbank's investors. They are its biggest customer. This is why we are seeing a lot of dollar activity from them. Central banks hold their reserves in dollar and as such are looking for US dollar sovereign paper and Rentenbank is able to offer this." And after its success Reinhardt is happy to give advice for new issuers looking to join the market. Despite the under performance of some dealers on his panel, Reinhardt believes that success does boil down to the relationship you share with your dealers. He says: "The ECP market is quite transparent. Levels of competitors and information about dealers can easily be obtained. The goals of a programme and the issuing capabilities under a programme should be clearly communicated to the dealers, to avoid misunderstandings and disappointment. Regular contact with the dealers is crucial."
April 06, 2001
