Deutsche Pfandbriefbank (PBB) listed on the Frankfurt Stock Exchange this morning after 80% of ordinary shares were sold at the bottom end of the price range raising €1.156bn in gross proceeds, in the long-awaited re-privatisation of the real estate and public finance lender in a process dubbed Project Triple One.
CoStar News understands that more than 150 separate accounts acquired 80% of the total share capital of PBB, comprised of predominantly long only hedge funds and private wealth funds in Europe and the US.
Among the shareholders, there was concentration of the largest top 10 shareholders taking around 50% of the 107.6m ordinary shares offered, equating to an aggregate ownership of 53.8m shares among the cornerstone investors.
The largest 20 shareholder participants took down around 70% of the total offering, reflecting 75.3m of PBB’s aggregate 134.5m ordinary shares, which includes the German government’s retained 20% stake, owned through the Federal Agency for Financial Market Stabilisation, known as SoFFin.
PBB’s IPO, which shrugged off macro jitters ahead of the Greece Referendum on new austerity proposals to press ahead with its schedule after just a 24 hour delay, placed shares at the bottom end of the €10.75m and €12.75m book building range.
At the €10.75m subscription price, the share placing was approximately three times covered.
CoStar News understands that although PBB could have covered the book at the €12.75 top end, the book’s coverage multiple was insufficiently high to be viable. In addition, there was some price sensitivity at the higher price range which would have seen certain cornerstone investors subscribing at a lower level than their preference allotment.
The €10.75 subscription price equates to an equity value of the bank of €1.45bn. Shares began trading on the Frankfurt Stock Exchange this morning at €11.45 – 6.5 % above the issue price.
PBB declined to comment on the make-up of its shareholder investor base, but in a prepared statement this morning, Andreas Arndt, PBB’s co-CEO und CFO, said: “The strong investor interest we have seen affirms our conservative business model. We want to continue boosting PBB’s profitability over the next few years thus continuing the success story of the past years.”
The net proceeds – after costs and expenses from the offering and listing of approximately €28m which include up to €17.1m in commission paid to the IPO underwriters – will be used to repay the German government’s bailout of Hypo Real Estate Group in 2009, which was the first nationalisation of a German bank in the post-war era.
The reprivatisation is six months ahead of the deadline imposed by the European Commission as a condition of its state bailout.
PBB is comprised of two active business lines – the €25.6bn pan-European real estate finance (REF) loan book and the €7.9bn public investment finance (PIF) book – which are dubbed the bank’s strategic portfolios.
PBB’s aggregate loan book also includes its €25.9bn non-strategic value portfolio (VP), comprised of bonds and promissory notes as well as some real estate and public finance assets, and its €7.0bn Consolidation & Adjustments (C&A) segment which primarily includes liquid investment grade bonds sponsored by sovereign and public sector entities and promissory notes to local.
Complex technical reasons prevented the transfer of PBB’s unwanted VP loan book into FMS Wertmanagement, the bad bank formed from the legacy Hypo Real Estate bank, prior to re-privatisation.
The run-down of the VP book, however, will release risk-weighted assets over time which in turn could be share price accretive.
The Project Triple One codename is thought to reflect the bank’s preference for a IPO over a private treaty sale.
Citigroup Global Markets Limited and Deutsche Bank AG acted as joint global co-ordinators and joint bookrunners for PBB’s flotation. JP Morgan Securities, Commerzbank AG and Joh. Berenberg, Gossler & Co. KG acted as additional joint bookrunners.