Deutsche Bank to Buy Back $5.4 Billion in Debt -- 2nd Update
13 February 2016 - 2:47AM
Dow Jones News
By Jenny Strasburg and Madeleine Nissen
Deutsche Bank AG said it will buy back $5.4 billion of its
senior unsecured debt, in a move designed to bolster investor
confidence in the German lender's liquidity and in the value of its
securities.
The announcement came at the end of a volatile week for Deutsche
Bank shares and the broader market for bank stocks, particularly in
Europe.
Deutsche Bank, which is undergoing a broad restructuring program
under new management, has been hit harder than most big peers as
investors have worried about the bank's capital buffers, litigation
costs and the extent of its ability to profit amid market
turmoil.
The buyback offer announced Friday afternoon in Europe targets
up to EUR3 billion ($3.4 billion) in euro-denominated securities
and $2 billion in U.S. dollar-denominated securities.
The announcement came a day after J.P. Morgan Chase & Co.'s
shares rebounded on news that the U.S. bank's chairman and chief
executive, James Dimon, had bought 500,000 of J.P. Morgan's shares,
for $26.6 million.
Deutsche Bank said its public tender offer was effective Friday
for seven to 20 business days for euro- and U.S. dollar-denominated
securities, respectively.
The buyback "certainly isn't a negative for the market" but "the
tender levels don't look that attractive for investors," said Tom
Ross, a portfolio manager at Henderson Global Investors, who
doesn't hold Deutsche Bank bonds. He said the buyback doesn't
address bigger questions about Deutsche Bank's capital levels.
The bank said Friday it had EUR215 billion in liquidity reserves
at the end of 2015, as previously disclosed.
Deutsche Bank "is taking advantage of market conditions to
repurchase this debt, lowering its debt burden at attractive
prices," Marcus Schenck, the finance chief, said in a statement.
"By repurchasing this debt below its issue price, the bank realizes
a profit."
Before the announcement, Deutsche Bank shares were up 8% Friday.
The announcement boosted them slightly, to near 10% on the day.
Word of a potential bond buyback had helped stabilize Deutsche Bank
shares earlier in the week following a 9.5% fall on Monday.
Shares in the lender have been whipsawed this week amid
questions about the bank's restructuring and ability to pay
optional interest payments on its riskiest debt.
The shares are down about 35% this year.
Deutsche Bank said Friday the bond buyback wouldn't affect its
ability to pay interest on its riskiest bonds, called Additional
Tier 1 bonds, which are also commonly referred to as contingent
convertible bonds, or CoCos.
The bank earlier this week issued a rare statement reassuring
the market it had sufficient funds to pay interest on that riskier
debt, and in a letter to employees, co-Chief Executive John Cryan
said Deutsche Bank is "absolutely rock-solid."
On Friday, Germany's finance minister said he wasn't concerned
about the financial health of Deutsche Bank.
"Deutsche Bank has sufficient capital," Wolfgang Schäuble told
journalists in Brussels. "Deutsche Bank is a strong bank," he
said.
Write to Jenny Strasburg at jenny.strasburg@wsj.com and
Madeleine Nissen at Madeleine.Nissen@wsj.com
(END) Dow Jones Newswires
February 12, 2016 10:32 ET (15:32 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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