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By Aimee Donnellan
LONDON, May 19 (IFR) - Deutsche Bank is preparing to issue its eagerly awaited inaugural Additional Tier 1 bond in the coming days ahead of its annual general meeting and after it announced plans to raise 8bn in new equity capital.
Germany's largest bank is aiming to raise around 3bn-equivalent in Additional Tier 1 debt from a perpetual non-call six-year US dollar bond, a perpetual non-call eight-year euro trade and a perpetual non-call 12-year sterling issue.
The deal had been expected last week, but failed to emerge amid rumours of snags with documentation. The transactions are now expected to emerge before the AGM on May 22.
"The capital announcement explains the strange lack of action following the conclusion of its Additional Tier 1 roadshow last week, and the capital increase should have a positive impact on pricing," said Simon Adamson, a credit analyst at CreditSights.
The bank's bond curve has tightened between 1bp and 5bp, while its five-year senior CDS is 1bp tighter.
On Sunday, Deutsche Bank explained that its surprised multi-billion equity plan was driven by uncertainty about the cost of new regulations and the need for funds to expand its investment banking business.
Germany's largest bank is bringing in Qatar's royal family as a major new investor.
The equity plan gives Deutsche the firepower for the investment banking push, especially in the United States, after a retreat by competitors Barclays, UBS and others left a gap that it aims to fill, according to Reuters.
But it also underscores how the bank fell short of its ambitious turnaround targets and how burdensome fines and settlements and lagging profitability have hampered management's efforts to fortify capital by retaining earnings.
According to Adamson, Deutsche's leverage ratio will increase by around 60bp, meaning its pro-forma Basel 3 fully loaded ratio including and excluding existing Tier 1 securities will rise to 3.8% and 3.1%, respectively.
"The latter ratio would improve to around 3.5% including the 5bn AT1s that Deutsche Bank plans to issue by end-2015," he added.
The high-risk contingent capital transaction will be lead managed by Deutsche Bank's own investment bank, together with Banca IMI, Barclays, Commerzbank, Danske Bank, ING, Lloyds, RBI, Santander, SG, UBS and UniCredit. (Reporting by Aimee Donnellan; Editing by Helene Durand, Julian Baker)