Deutsche Bank AG is paying twice as big a premium to borrow in international debt markets compared with a year ago, as investors demand higher compensation for the risk of future legal costs.
The bank agreed to 300 basis points of extra yield above benchmark rates in a $3 billion private sale of senior unsecured bonds on Friday, according to data compiled by Bloomberg. hat compares with the 143 basis points the bank paid in a non-private sale of similar notes in August 2015.
"They are trying to show they still have sizable access to funding, but they are paying up for it," said Paul Dilworth, a fixed-income analyst at Kames Capital Plc in Edinburgh, which oversees 50 billion pounds ($62 billion) of assets.
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The German lender's shares and bonds have tumbled this year as CEO John Cryan struggles to shore up capital and boost profitability. The bank is also seeking to reach a deal with the U.S. Justice Department to end a years-long investigation into its handling of mortgage-backed securities, after rebuffing an initial claim for a $14 billion settlement.
The new notes were priced to yield 4.26%, based on Bloomberg calculations. That compares with an average yield of 2.8% for U.S. dollar-denominated financial bonds, according to a Bloomberg Barclays index.
A small number of U.S. money managers bought the notes, said two people familiar with the matter who asked not to be identified because the sale was private.
Charlie Oliver, a spokesman for the Frankfurt-based lender, declined to comment on the bond sale.
"It's a large deal and I see it as management attempting to show that it still has market access," said Lloyd Harris, a London-based portfolio manager at Old Mutual Global Investors U.K. Ltd., which oversees 27 billion pounds.
Bloomberg News
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