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By Danielle Robinson
NEW YORK, May 19 (IFR) - Deutsche Bank is set to price its much-anticipated Additional Tier 1 (AT1) transaction on Tuesday during European hours after it began marketing the triple-currency deal at attractive levels.
The dollar-denominated Reg S only perpetual non-call six-year is being marketed at 6.625%, the euro perpetual NC eight-year at 6.375% and the sterling denominated perpetual NC 12-year at 7.5%, sources close to the deal said.
The ground-breaking inaugural AT1 trade by the German lender is expected to raise at least 3bn-equivalent, and all three tranches are likely to price at tighter levels than the initial price thoughts.
The bank announced plans to raise 8bn in new equity capital over the weekend and sources with knowledge of the deal said that the book sizes for all three tranches were oversubscribed as they were passed over to Asia’s Tuesday session.
The books are expected to close in Europe’s morning, with pricing before London trading closes on Tuesday.
News of Deutsche’s equity raise - 6.3bn in a rights issue in June and 1.75bn from the Qatar royal family - will boost its additional common equity Tier 1 (on a Basel 3 fully loaded bases) to around 11.8% from 9.5% in the first quarter.
News of the capital raise will be a huge boost to pricing strength on the AT1s and on Monday caused its dollar bonds to outperform other financial institution Yankee bonds.
“Deutsche bonds have done phenomenally well in the last few trading days,” said one syndicate manager in the US.
Its dollar subordinated 4.296% 15 non-call 10 2028s were trading 12bp tighter on Monday, at around Treasuries plus 205bp/210bp.
Although none of the pending AT1s from Deutsche will be offered to US domiciled investors, bankers in the US are closely watching the Reg S dollar tranche.
“If Deutsche’s Reg S perp NC 6 comes at or through 6.5% it will be a pretty reasonable outcome for them,” said a FIG banker.
Deutsche is expected to follow with a 144a documentation AT1 at some point. (Reporting by Danielle Robinson, editing by Alex Chambers, Marc Carnegie)