Deutsche Bank prices €680m IVG ‘BONN’ CMBS at under 200 bps

Deutsche Bank has closed the €679.9m DECO 2014 BONN securitisation achieving a blended margin of 199 basis points across the six classes of notes.

Handelsraum Deutsche BankThe achieved blended margin reflects a 41 basis points less than the 240bps margin which Deutsche Bank funded the underlying €680m senior loan back on 30 September.

Given the metrics of the underlying property portfolio – 29 secondary quality German offices owned by IVG Immobilien with a portfolio weighted average unexpired lease term (WAULT) to first break of just 5.7 years – the achieved pricing underscores the efficiency of capital markets for investment banks exiting risk.

The final DECO 2014 BONN CMBS pricing was as follows:

CLASS        SIZE (€m)        Rating (S&P/Fitch)  COUPON             LTV                 WAL

  • A                330.0            AAA /AAA                  3m€+125bps       33.5%              4.7
  • B                50.0              AA+/ AA+                  3m€+165bps        38.6%              4.9
  • C                77.0               AA/ AA-                      3m€+190bps       46.5%              4.9
  • D               92.0               A / A-                          3m€+235bps        55.8%              4.9
  • E               89.0               BBB/ BBB-                 3m€+345bps       64.9%              4.9
  • F                41.9               BB+/ BB                     3m€+450bps       69.1%               4.9

Total               679.9

Pricing closed yesterday, after initial pricing talk was issued last Wednesday, and takes the annual transaction volume for European CMBS to €3.5bn, and to €4.2bn when privately placed CMBS-like bonds are counted. 

Whichever figure is adopted, the annual volumes are substantially below the issuance of 2013, when €8.2bn was closed in 12 transactions.   Next year, analysts predict an upswing in total issuance again, with forecasts of up to €8bn for 2015.

The origins of Deutsche Bank’s latest securitisation date back to August 2014 when the Court of Bonn approved IVG’s insolvency plan that included a debt-for-equity-swap of about €1.8bn of bank debt and a waiver of a subordinated €400m hybrid bond. 

The following month, Deutsche Bank refinanced IVG with €1.5bn in fresh debt across two loans, in a process dubbed Project Surrogate.  The loans were: the €805m AG Facility and the €680m core facility, the latter of which is the loan securitised in the BONN transaction.

Deutsche Bank completed the syndication of the €805m AG Facility around six weeks ago.

The five-year €680.0m IVG Core Loan was funded by Deutsche Bank the on 30 September and is secured by 29 offices throughout Germany valued at €983.66m, according to a December 2013 Cushman & Wakefield valuation. This reflects a 69.1% LTV or €1,349 per square metres.  

Bank of America Merrill Lynch (BAML) provided the interest rate swap, and has been given joint billing on the deal as co-arranger and lead manager.  Royal Bank of Canada provided the swap cap.  BONN matures on 31 October 2009, with a legal final maturity five years later.

The majority of assets located in Stuttgart, Frankfurt, Hamburg and München, each comprising 28.6%, 24.1%, 15.5% and 13.9% of the Portfolio market value, respectively.

There is a concentration of value in the four largest assets – Theodor-Stern-Kai 1 in Frankfurt, Buschlestraße1/ Reinsburgstraße 26-34 in Stuttgart, Fritz-Schäffer-Straße 9 in Munich and Uhlandstraße 2 in Stuttgart – which together account for €603m, or 61.3% of the property portfolio’s value.

All four assets are either fully or majority let to Allianz Deutschland AG, accounting for €37.2m, or 54.9%, of the entire property portfolio’s €67.7m annual gross rental income.

About CoStar News

Finance Editor, CoStar News
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