Deutsche Bank buyback said to spark backlash

Investors upset: Money managers are planning to hold discussions next week to explore their options on how best to challenge Deutsche Bank. — Reuters

NEW YORK: Investors who scooped up bonds sold by Deutsche Bank AG last month are pushing for better terms in the bank’s US$5.4bil debt buyback plan, saying they were misled because the German lender failed to disclose its true financial position before the sale, according to people with knowledge of the matter.

Some of the bondholders who participated in the US$1.75bil, two-part offering say the bank, which announced a fourth-quarter earnings loss less than two weeks after the sale, should’ve made that disclosure before selling the bonds, the people said, asking not to be identified as the discussions are private.

Some investors were so upset that they may raise the issue with regulators, the people said.

The money managers were planning to hold discussions next week to explore their options on how best to challenge the bank, the people said. In addition to raising concern about disclosure, the bondholders are pushing for greater priority and better terms in the bank’s buyback offer announced Friday.

Kerrie McHugh, a spokeswoman for Deutsche Bank in New York, declined to comment.

Deutsche Bank’s buyback comes as the lender attempts to reassure investors who dumped European bank bonds and shares this week amid concerns over declining earnings and slowing global growth. The lender’s debt in a Bloomberg investment-grade bond index have dropped 2.7% in the past month compared with a 0.4% decline for all bank debt. The US$750mil of 4.1% notes sold in January slumped 5.7%.

The firms that bought the biggest piece of the January offering at 100 cents on the dollar are now getting an offer to sell them back to the bank at as much as 97.3 cents, according to calculations by Bloomberg Intelligence analyst Arnold Kakuda. The securities traded at 95.6 cents on Thursday.

Deutsche Bank, which unveiled the sale of the bonds on Jan 8, said on Jan 21 that it would post a 2.1 billion-euro loss for the fourth quarter after setting aside more money for legal matters and taking a restructuring charge.

Moody’s Investors Service cut its long-term debt rating on the bank to Baa1 from A3, citing structural issues that contributed to “weak profitability,” and the expense of maintaining a global capital-market footprint, the ratings firm said in a Jan 25 statement. — Bloomberg

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