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Monday, 20 November 2017

Structured Finance House and EMEA Structured Finance House: Deutsche Bank

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Deutsche Bank clearly differentiated itself in the structured finance market this year. For successfully mixing origination expertise, innovative structuring techniques and demonstrating truly global distribution skills, the bank is IFR’s Structured Finance House and EMEA Structured Finance House of the Year.

Consistency was the hallmark of Deutsche Bank’s performance in the structured finance market, as the bank showed an unmatched ability to pick the right spots in a highly competitive market.

The group led by Elad Shraga was active across a wide spectrum of products.

“It was a year when we were present in both segments of the market – namely flow and innovation – by leading deals from a wide array of product classes and for a number of first-time issuers,” said Tom Cheung, co-head of structured credit at Deutsche in New York. “We also differentiated ourselves from others by being at the forefront of creating customised solutions that met the needs of investors and issuers.”

Deutsche dominated US CMBS issuance, where primary volumes headed towards a new post-crisis record. During the awards period the bank topped the CMBS/MBS league table, with 41 trades for US$15.6bn, a share of 16.3% up from the third-placed 11.4% the previous year.

Trades backed by nursing facilities, trophy New York asset spaces and landmark hotels in Hawaii and San Francisco highlighted the bank’s expertise and ability to innovate in the US mortgage arena.

Deutsche also resurrected CMBS formats not seen in Europe since the financial crisis. This included the multi-loan Deco 2014-Gondola from Italy and multi-borrower Deco 2014-Tulip from the Netherlands.

The bank has plenty of stock to choose from, having originated €6bn of new loans in the past year.

In addition, it also structured the first small-loan Australian CMBS (for Think Tank) for seven years and was a joint lead on the £750m Westfield shopping centre deal, despite not being on the original lender panel.

Innovation

The ABS space also showcased the bank’s innovation and leadership skills, mixing large traditional securitisation mandates with inaugural transactions.

“Over the course of the year, the bulk of the market’s issuance activity has come from a few issuers and we had our fair share of that flow, [but] our breadth extended beyond that,” said Jay Steiner, head of banking and origination in the credit solutions group.

In the flow ABS space, Deutsche covered core consumer ABS, including autos, credit cards, housing-related products, student loans and CLOs.

In 2014, the bank structured five single family rental securitisations, selling large chunks of bonds to European accounts, five container securitisations and three timeshare trades.

It was involved in GM Financial’s first term lease securitisation, Santander’s largest auto trade of 2014 and Hilton’s second term timeshare transaction that include a dual-tranche structure.

The bank excelled in customising solutions that blended capital markets structuring, investor dialogue and syndication expertise.

For example, Deutsche structured a deal backed by clean energy loans for Hero Funding Trust. PACE liens help to defray the upfront costs of retrofitting properties with solar panels, insulation and other energy-saving improvements through property tax credits lasting up to 15 to 20 years.

About 90 individual PACE limited obligation bonds secured the US$104m ABS trade.

Green energy and structured finance became more commingled later in the year, when Deutsche led the second ABS backed by energy efficiency bonds.

The US$129.145m single-tranche deal, called HERO Funding 2014-2, was backed by bonds from two PACE programmes in California, municipal initiatives to spur renewable and energy-efficient home and building projects.

OnDeck’s US$175m two-tranche bond in April, meanwhile, was the first trade that securitised non-guaranteed small business loans.

“We spent six months working with OnDeck and rating agency DBRS to create the bond, which opened up this market because we used a blue-chip issuer to make investors comfortable with the sector,” said Steiner.

Deutsche was also active in the student loan space. The bank approached Navient with a proposed transaction and discretely placed six issues for US$1.26bn, with separate investor pools for the Triple A and subordinate bonds.

Diversity

The bank pushed such structures outside of the US too, through deals such as Nordax’s Scandinavian Consumer Loans IV, while in Asia Deutsche was lead manager on seven Australian RMBS trades, with considerable offshore placement.

All this adds to German, Norwegian and UK auto ABS (in euros, kroner and US dollars), prime and non-conforming UK RMBS, Dutch and Italian RMBS, Italian consumer loans, Norwegian consumer loans, Portuguese and German SME deals, CLOs and CMBS.

The bank has also reaped the distribution benefits of close relationships with its trading desk – retaining the coveted top rank in the Greenwich Associates survey that measures revenues, breadth of coverage and client satisfaction.

Run by Nick Waring in London, the trading desk regularly participates in Italian secondary market block sales, and the business has profited from this pricing knowledge to gain new bookrunner mandates. Both Banca Popolare di Vicenza and Veneto Banca were new RMBS clients for Deutsche, while the bank also won important business in Portugal.

Given the ECB’s focus on the real economy, SMEs are likely to be a big factor for the European ABS market. And Deutsche’s early work stands it in good stead.

It was joint arranger and sole bookrunner on Banif’s Atlantes SME No 4. Portuguese trades are a rarity, but Deutsche also sold Class B bonds to investors from six countries. It was also a joint lead on IKB’s first public leasing SME deal, German Mittelstand Equipment Finance No 2.

Aegon’s Dutch RMBS was another highlight for the bank, as it brought in reverse enquiry from Asia in the Class A2 notes.

Deutsche was active in eight European countries during the review period, displaying a healthy mix of esoteric and flow trades that have boosted its volumes.

“Last year, we spent a lot of time on private-side lending. That has remained core to this business but from a league table and public issuance perspective we have outperformed where we were last year,” said Dan Pietrzak, co-head of structured credit.

Two examples also highlight the bank’s work in the off-the-run space. Deutsche said it provided acquisition financing to AnaCap to allow it to purchase a consumer loan portfolio from “Consum.it”. The structured deal closed in December 2013, and Deutsche sold part of it into the market through a secondary market reoffering.

In Ireland, the bank lent First Citizen, a subsidiary of Permanent TSB, money to restart auto loan lending. Deutsche then sourced a US credit fund to take the first loss on the €100m loan, in another display of global co-ordination.

Its increased public presence, meanwhile, is borne out by the numbers. Deutsche’s market share rose to 8.3% in the European league table during the awards period, with US$7.3bn of credit – up from 4%.

These numbers exclude more than €740m from two CLOs. One of these was a debut deal for Chenavari, where Deutsche had to deal with document changes in response to investor queries and pricing in a sticky market in August.

The bank may lack the record of European corporate securitisation of some of its counterparts, but it is not completely without issuance in this arena.

For example, it was joint lead on a Slovakian PFI, a Belgian motorway project, as well as a UK pub trade in the awards period.

And this breadth of skills continues to win it high praise. “The structuring work, how they helped us to handle the rating agencies and the broadened and widened investor participation … were excellent achievements,” said the treasurer of one of the bank’s European clients.

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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