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By Alice Gledhill
LONDON, Sept 27 (IFR) - Concerns around the German banking
sector forced Norddeutsche Landesbank to shelve a senior bond on
Tuesday after the issuer struggled to find enough demand to
cover the seven-year trade.
The German lender, Baa1/NR/A-, started marketing the
benchmark trade on Monday at 90bp area over mid-swaps via leads
BNP Paribas, DZ Bank, NordLB, Santander (B&D) and UniCredit.
However, the issuer's ambitions were cut short as renewed
concerns around Deutsche Bank's capital position swirled around
the market, sending spreads wider.
"It didn't get the response that you would want. There is
too much noise around the German banking sector," a lead manager
Deutsche Bank's bonds shot wider despite the bank insisting
it can weather a potential US$14bn fine without raising extra
capital and that it had not sought a government bailout.
A 750m 4.5% 2026 Tier 2 bond has widened 24bp since
Monday's open to swaps plus 509bp.
But Deutsche Bank is not the only culprit. The German
Landesbank sector, of which NordLB is a part, has also come
under intense scrutiny this year given the damaging scale of its
shipping loan exposures.
Reuters reported earlier this month that the German
state-controlled lender had agreed to take full control of its
loss-making Bremer Landesbank unit, which is suffering from a
weak shipping market that is chipping away at its capital.
Moody's downgraded NordLB earlier this month following that
announcement after both entities reported losses in the first
half. NordLB's senior rating was lowered to Baa1 (negative) from
A3. It is A- (stable) by Fitch.
NordLB's 750m January 2021s, issued in January at swaps
plus 77bp on books of just under 800m, were bid around 41bp on
September 6 but are now around 67bp, according to Tradeweb
It is not the fist time NordLB has had to pull a transaction
because of poor market conditions. The issuer delayed an
inaugural Additional Tier 1 deal after a massive market
correction slammed the brakes on riskier trades in May 2015. The
trade was never revived.
NordLB is the second deal to be pulled this week in the
European bond market. Lufthansa mothballed a proposed 500m
no-grow seven-year on Monday after refusing to compromise on
In a statement released on Tuesday NordLB thanked investors
for their interest in the transaction, but said it had "decided
not to proceed with the transaction at this point. The company
is looking forward to re-engaging with investors again in the
(Reporting by Alice Gledhill, Editing by Helene Durand, Julian