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Friday, 17 November 2017

EMEA Loan House: Deutsche Bank

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  • Reaping the rewards

After years of cut-price refinancing, big ticket M&A lending finally made a welcome return to the EMEA loan market in 2014. For standing at the forefront of market developments and for making the most of the new lending opportunities, Deutsche Bank is IFR’s EMEA Loan House of the Year.

The European loan market in 2014 finally delivered for banks that were ready to underwrite, as corporates moved to back their long-awaited expansion plans with large debt financings. It was a relief for bankers who had spent the past few years pitching for more exciting M&A business to augment a dull diet of loss-leading refinancing.

Deutsche Bank was at the forefront of this surge of event-driven financing, leading six of the 10 biggest underwritten facilities for corporate borrowers in 2014, more than any other bank. They included the largest – €12.5bn-equivalent of facilities backing ZF Friedrichshafen’s acquisition of TRW.

“The middle of the year saw an explosion of acquisition financing. There was more acquisition financing over those three or four months than in the previous three or four years combined. The question was, who was ready to step up and who was ready to underwrite?” said Nick Jansa, head of European leveraged DCM.

Deutsche made good use of its balance sheet liquidity to make a wide variety of underwritings, including a huge €7bn sole-underwriting backing German software firm SAP’s acquisition of Concur Technologies.

A high proportion of these deals were bridge loans to take-outs and Deutsche excelled in showcasing its expertise across the capital markets, helping borrowers structure deals in the most intelligent, efficient way.

Other major acquisition deals backed by Deutsche were the US$15.6bn loan for German drug maker Merck’s purchase of Sigma-Aldrich and US$3.5bn of loans for Swedish Electrolux’s takeover of GE Appliances.

Activity was not confined to the bank’s core European markets, as Deutsche was also a lead bank on Abu Dhabi telco Etisalat’s €3.15bn bridge loan to purchase a 53% stake in Maroc Telecom.

Apart from its big hit rate on major M&A deals, Deutsche remained a top provider of general corporate refinancing. It led key deals across sectors and ratings categories, such as the US$6bn deal for miner BHP Billiton, British American Tobacco’s £3bn refinancing, German Continental’s €4.5bn facility and PSA Peugeot Citroen’s €3bn loan.

Leveraged leader

Increased M&A activity also dominated the leveraged loan market in 2014 and Deutsche was at the forefront, underwriting debt packages for both sponsor-backed companies and large leveraged corporate deals.

Deutsche led significant sponsor-backed deals for Dutch Bureau van Dijk, Luxembourg’s Flint, card payment services company Nets, advertising firm Scout24 and Germany’s WMF. It also backed major corporate deals for healthcare firm Generale de Sante and cable companies Numericable and Ziggo.

It was a market leader in transatlantic sales and trading platforms, and optimised its resources to take a lead role on the biggest global deals, committing to large underwritings and using its knowledge to efficiently price and distribute risk.

“Being global is critical, which is where we have been able to be ahead of the curve. Covenant-lite and second-lien loans have been happening in the US for three years and are now in Europe, so you need to have a US franchise in order to understand the market properly,” said Jansa.

Deutsche was global co-ordinator and one of three underwriters on the €16.8bn-equivalent leveraged financing backing Numericable’s acquisition of French telecoms outfit SFR. The combined leveraged loan and high-yield bond financing was the largest single debt-raising in Europe and both pieces won IFR Awards.

Deutsche was lead-left on the loan portion, which included €1.9bn and US$2.6bn of covenant-lite term loans – the largest-ever European covenant-lite loans. The bank led nine of the 24 covenant-lite deals in Europe in 2014, more than any other bank.

It was also at the centre of the subordinated debt markets, leading 50% more second-lien loans for European companies than any other bank in 2014, with nine of 18 deals.

Deutsche opened the European post-crisis second-lien market with BvD’s dividend recapitalisation in February, the first syndicated second-lien transaction for seven years, followed shortly after by Dutch Intertrust’s €850m first and second-lien dividend financing, which was 2014’s largest European dividend recap.

2014 set another post-crisis dividend recap record as sponsors took advantage of high demand for the asset class, and Deutsche was most active, leading eight of the 13 transactions.

“We hit all the major themes of the market,” said Jansa.

To see the digital version of the IFR Review of the Year, please click here.

To purchase printed copies or a PDF of this report, please email gloria.balbastro@thomsonreuters.com.

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