FRANKFURT Deutsche Bank's (DBKGn.DE) plans for an 8 billion euro ($11 billion) capital hike came to an abrupt halt on Wednesday when a procedural bottleneck in a German court forced Germany's flagship lender to delay the issue by several days.
The bank's biggest investor, Sheikh Hamad Bin Jassim Bin Jabor Al-Thani of Qatar, has made his first contribution to the capital hike, paying 1.75 billion euros for 60 million shares, but a Frankfurt court has taken longer than expected to enter the purchase into the shareholder registry, three market sources told Reuters.
Until that paper jam is cleared, the second part of the capital hike plan - a 6.3 billion euros rights issue - cannot proceed, putting the whole 8 billion euro exercise on hold but not threatening it in any way, the sources said.
The delay comes as an embarrassing glitch in Deutsche Bank's second capital hike in as many years, designed to strengthen its capital base and to see the bank through a costly restructuring. Deutsche originally intended to price the rights on Wednesday.
"This is not nice but it won't put the rights issue at risk," said one source.
"It's a technical issue. It has nothing to do with demand," said a second market participant.
Deutsche Bank declined to comment.
CHAIN OF EVENTS
The exercise depends upon a series of events happening in sequence and the rights issue cannot proceed until the new investor's shares have been registered so that he, too, may sign up for the rights that his new holdings imply, one source said.
Sheikh Hamad Bin Jassim is expected to invest a total of over 2 billion euros and hold around 6 percent of Deutsche Bank shares when the two-part capital hike is completed.
Germany's largest bank has spent the past two weeks marketing the rights issue to its shareholders with promises of both cost cuts and future growth.
Investors have broadly welcomed the issue, saying it will put concerns about capital weakness to rest for at least a year as co-Chief Executives Anshu Jain and Juergen Fitschen complete a turnaround plan.
Deutsche sees itself as Europe’s last man standing in the investment banking sphere after a pull-back by Barclays (BARC.L), UBS UBSN.VX and others left a gap that it aims to fill as a top debt trader.
It wants to fortify its position in North America and Asia in wealth management and investment banking while modernizing its domestic retail franchise in Germany.
But at least half of the new money will go to filling new capital demands triggered by regulatory reforms, bank officials have told investors.
Market participants have pointed to a price range between 21 euros and 21.50 euros in recent days but said the range was subject to fluctuations depending on the bank's actual share price.
A price of 21 euros would be the lowest possible level for Deutsche to fulfill its goals and close to the price indicated when it announced the deal.
Deutsche shares have fallen some 14 percent since the start of the year compared with a 4 percent rise on average by rivals .SX7P, partly due to expectations of a dilutive capital hike.