(adds background, more details)
By Kirsti Knolle and Aimee Donnellan
FRANKFURT/LONDON, April 28 (Reuters/IFR) - Deutsche Bank announced its first-ever Additional Tier 1 (AT1) bondsale on Monday, a multi-currency benchmark deal intended toaddress concerns about its capital reserves.
Aiming to satisfy new regulations for European banks in thewake of the global financial crisis, Deutsche plans to raise upto EUR5bn in deeply subordinated bonds to shore up its balancesheet.
The multi-currency nature of the trade - as well as thepotential overall size of the deal - will set a precedent forEuropean banks dealing with the new regulatory framework.
"Today's announced transaction is the first step towardsreaching the overall targeted volume of approximately EUR5billion of CRD 4 compliant Additional Tier 1 capital which thebank plans to issue by the end of 2015," Deutsche Bank said.
The issuance will be the third step in a series of measuresannounced a year ago to strengthen the bank's capital structure.It follows a EUR3 billion equity capital raise in April 2013 andthe issuance of USD1.5 billion CRD 4 compliant Tier 2 securitiesin May 2013.
The lender said the AT1 notes, also known as CoCos, willhave a temporary write-down at a trigger level of 5.125 percentphase-in attached warrants, excluding shareholders' pre-emptiverights.
Market expectations are that it will tap the euro, sterlingand US dollar markets simultaneously.
NEW LANDSCAPE
Tougher Basel III regulation is forcing banks to be creativein meeting capital levels.
So far only Lloyds has raised more than EUR5bn inthe AT1 market - but that deal was done as part of an exchange,and so did not truly test demand for a brand new issue.
AT1 is a relatively new type of instrument that provides abank in trouble with capital when it needs it most, either bytemporarily reducing investors' principal or converting theirholdings into equity.
Deutsche Bank's AT1 bonds are expected to follow thetemplate set by French banks by using the temporary write-downstructure where investors can eventually see their holdingsrecovering.
Earlier this month, Germany's finance ministry gave Germanlenders long-awaited certainty on the tax treatment of theseinstruments, bringing the country in line withthe United Kingdom, Denmark, Belgium, Italy, France and Spainwhere banks have forged ahead by raising billions in the format.
Deutsche, which will release its interim report on Tuesday,has been under pressure from regulators in recent months tobolster its capital base and could need as much as EUR2.2bn inextra capital to meet tough new rules from the European BankingAuthority.
Deutsche Bank said last month that its CDR4 pro-forma CommonEquity Tier 1 ratio was 9.7% at the end of 2013.
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DB 2013 annual report
https://www.db.com/ir/en/content/ir_releases_2014_4579.htm
ADDITIONAL TIER 1 MARKET: http://www.ifre.com/21135425.article?saddnavigator=categorynavigator(sort=frequency/descending),monthnavigator(sort=number/descending),yearnavigator(sort=name/descending),storytypenavigator(sort=frequency/descending),organisationsnavigator(sort=frequency/descending)&sAddKeyword=deutsche+bank+additional+tier+1&vec=[secondary%20market,%201][danske%20bank,%201][investors,%200.894427] (Reporting by Kirsti Knolle at Reuters and Aimee Donnellan atIFR; Writing by Helene Durand; Editing by Natalie Harrison andMarc Carnegie)
Lloyds (LLOY)