Unraveling the Challenges of Deutsche Pfandbriefbank AG's Bond Offering
Initial Bond Sale and Aftermath
Banks were left holding as much as €200 million of a €500 million green bond. Some banks are now offering to sell the bond below its issue price, as data compiled by Bloomberg shows. This difficulty in selling the debt highlights the lingering concerns about PBB even after its debt recovered from a panic sale earlier this year. The offering faced stiff competition from other deals in the market on Wednesday. During the sale, banks disclosed orders of more than €500 million, which seemed just enough to cover the deal. However, final books were undisclosed. Three people said that some of the order book fell apart and struggled to draw enough demand at the price set by bankers.
The long three-year bond ended up being priced at 180 basis points above midswaps, virtually unchanged from initial price thoughts. This is a rare occurrence in the new issue market as bankers usually take advantage of demand to tighten the spread during an offering. Less than 3% of deals from financial issuers in Europe this year have failed to tighten, according to Bloomberg data.
Bank's Perspective and Spokesperson's Comments
A spokesperson at PBB stated that the bank used the improvement in secondary market pricing for its bonds to carry out the transaction that had been planned for next year. They also mentioned that the initial price thoughts came significantly under the bank's previous green bond offering in 2023. This provides insight into the bank's strategy and reasoning behind the bond sale.
Representatives at DZ Bank AG, Landesbank Baden-Wuerttemberg, Erste Group Bank, and Banco Santander SA, which arranged the offering, declined to comment. Spokespeople at Danske Bank A/S and UniCredit SpA, the other arranging banks, did not respond to a request for comment. This lack of response adds to the mystery surrounding the bond sale and the banks' involvement.
February's Bond Slump and Recovery
In February, PBB bonds slumped and its most junior debt was indicated below 20 cents on the euro due to fears of spreading contagion from the troubled US commercial property market. However, since then, PBB bonds have shown signs of recovery, indicating a potential turnaround in the market sentiment towards the bank.
This recovery is an important aspect to consider as it shows the resilience of PBB bonds in the face of market uncertainties. It also highlights the need for banks to carefully manage their bond sales and navigate through challenging market conditions.