Access all areas: Liability management is a crucial part of any top-tier bank’s armoury these days. To succeed in this area takes commitment and requires dedicated experts able to deliver a strong deal roster across a diverse range of asset classes. Deutsche Bank demonstrated all these things and is IFR’s EMEA Liability Management House of the Year.
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Liability management has become an increasingly crucial part of the capital markets toolbox. Virtually every bank claims to have a creditable LM operation, and the growth of the sector has been such that there has been sufficient business for many of them to get a slice of the pie.
But it takes more than just a decent bond franchise to get to the top of the pile in LM, and Deutsche has been honing these skills for more than a decade, boasting a team dedicated to the product that is able to react to any situation and come up with innovative and practicable solutions.
“What is of the greatest importance is that you have people working together to get to the desired end,” said Duane Hebert, Deutsche’s head of LM for EMEA and Asia.
And this does not just revolve around the technicians in the field. It also involves crucial input from the sales and trading desks and requires a thorough understanding of market dynamics.
“You need to be able to advise strategically and then execute,” said Vinod Vasan, head of European FIG DCM. “You have to be innovative across all asset classes. In FIG, that means covered, ABS, senior and capital.”
Deutsche’s understanding of the hybrid sector was underlined by its involvement in Lloyds’ £4.9bn-equivalent Tier 2 exchange in December 2011 across numerous currencies, which received a creditable 61% take-up as the issuer looked to switch investors into new LT2 notes with on-market coupons.
It also demonstrated its versatility by following this up with two senior deals for the UK bank – for £13.8bn in June and £22bn in September – again across diverse jurisdictions. The former marked the first major repurchase of senior unsecured notes by a financial institution and was at the time the year’s largest non-sovereign LM transaction.
The exercises saw a total of £8.6bn repurchased, taking advantage of Lloyds’ excess available liquidity, and their success led to other UK names such as RBS and Barclays following suit.
Other noteworthy deals executed included Santander’s €7.5bn tender across 21 capital notes in August (capped at €2bn), many of which had been targeted in previous exercises.
The use of an unmodified Dutch auction procedure was a novel approach and one that lent itself to the illiquid nature of the underlying bonds and led to a take-up of €1.2bn, or 60% of the targeted amount, creating €193m of Core Tier 1 capital for Santander.
Again in the periphery, but this time in the ABS sector, Deutsche followed up its tender on behalf of Banco BPI (the first of its kind) with a €17bn exercise across 17 series for Bankia, which paved the way for a number of its compatriots to venture down the same route.
But LM in 2012 was not all about FIG.
By way of example – and a sizeable one at that – Deutsche was one of the banks nominated to be a closing agent for the €206bn debt restructuring for the Hellenic Republic that took place over a number of steps between February and April 2012.
And while Europe lagged behind the US in terms of corporate LM exercises, Deutsche played its part in both the investment-grade and high-yield markets, working on deals for Deutsche Boerse, Elisa, International Power, Atlas Copco, TMD Friction, Atrium, Lecta, Delhaize and Atlantia, among others.
Finnish paper and packaging outfit Stora Enso’s February tender on a series of 2014 notes and subsequent refinancing with 2019 paper was the first exercise out of the Nordic region and led to a number of follow-on deals, while the tender offer for Deutsche Boerse was the year’s only corporate hybrid LM exercise.
“We pride ourselves on doing the landmark deals,” said Hebert. “It’s not just about volume.”
