Despite the Ukraine war, rising inflation and higher interest rates, Deutsche Bank has successfully placed a risky mandatory convertible bond on the market.

The title of over 750 million euros is said to have been in demand by investors with 5.7 billion euros.

According to Dixit Joshi, who is responsible for the financing area, the so-called treasury of the bank, the issue was more than seven times oversubscribed.

Markus Fruehauf

Editor in Business.

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The high demand is remarkable: the bond can be counted as equity because it can be used immediately to top up equity if the equity ratio falls below a certain level.

This makes it significantly riskier than ordinary bonds.

On the financial market, these titles are also called CoCo Bonds, which is the abbreviation for Contingent Convertible.

These stocks have come under significant pressure since the Ukraine war.

Deutsche Bank is not the first European institution to have dared to enter the market with a CoCo bond in the adverse environment.

The major Italian bank Intesa Sanpaolo, whose title was oversubscribed three times over 1 billion euros, already dared to take this step a week ago.

The high level of interest in Deutsche Bank's latest issue can also be explained by the attractive conditions.

Investors are rewarded for the higher default risk with an annual interest coupon of 6.75 percent.

The bank can call the bond any day between October 30, 2028 and April 30, 2029, subject to regulatory approval.

Treasury boss Joshi is satisfied with the emissions so far.

Five bonds have been successfully issued since the beginning of the year.

"We have therefore already processed a large part of our refinancing plan for 2022," he was quoted as saying in the press release.

This means that Deutsche Bank can look forward to further developments on the bond market with relative composure.

The rating agency S&P Global warned of an adverse credit cycle on Tuesday.

The credit checkers expect worse prospects for corporate bonds, less favorable financing conditions and an increase in defaults.

You compare the shock of the Ukraine war to an earthquake and see a turning point in the credit cycle.

The energy supply, further disruptions in the supply chains and increasing inflationary pressure are the risks that European companies are exposed to in the coming months.

The rating agency Scope also expects the supply chain problems to continue.