Deutsche Bank plans to raise new Tier 1 debt in a deal that could reopen Europe's market for hybrid subordinated financial issues as banks seek to rebuild balance sheets in the wake of the financial crisis.
The German bank confirmed it planned to issue euro fixed-rate perpetual notes, with annual call dates beginning from March 2015, and said it was managing the issue.
The deal would be the first of an expected series of new Tier 1 notes to hit the market in coming months from banks that have not needed government bailouts.
The deal would be smaller than €1 billion as the bank was seeking to test the market's appetite for this type of issuance, said a source familiar with the plans.
The new issue is aimed primarily at retail investors, and talk in the market puts the yield at 9 to 10 per cent, said a fixed-income analyst who did not wish to be identified. That compares with its perpetual notes in the secondary market that were priced to yield around 8.25 per cent last week.
Tier 1 notes, also called hybrids, are a cross between debt and equity. They are typically perpetual securities with call dates, which a bank can ignore. A bank also can stop paying interest on them without triggering a default.
Deutsche Bank's Tier 1 ratings are all investment-grade.
Standard & Poor's rates its Tier 1 debt at BBB+, three notches below its A+ senior debt rating; Moody's Investors' Service at Aa3 or two notches below Aa1 for senior debt; and Fitch Ratings at A+, one notch below its AA- senior debt rating.
Reuters