As noted by FT Alphaville, Deutsche Bank’s decision not to exercise its callable bonds this week sent shivers through the market, with many suggesting the move could create an unsettling precedent for other corporates.
In case you were wondering which other bond issues might be affected, Societe Generale has drawn its own list of all the LT2 and T1 bonds callable in 2009 (echoing the list from JP Morgan yesterday).
To summarise, there are 22 T1 issues and 45 LT2 issues callable in 2009. But what’s interesting is the fact they highlight RBS bond as a particular concern. As they explain (our emphasis):
"A wide range of issues callable this year. There are 22 T1 issues callable in 2009, and a total of 45 LT2 issues. Institutionally-targeted deals make up roughly 45% of the T1 issues and all the LT2 issues with calls this year. We show the full list of bonds on the following pages of this report. Attention will focus in particular on the RBS T1 issues, with calls in March 31 and December 31.
"Deutsche Bank’s decision sets a precedent as it is a major international bank. In 2008, when bank funding and liquidity were already under significant pressure, almost all hybrid bonds with call dates during the year were called. The one exception - a 150m LT2 bond issued by Credito Valtellinese was considered anomalous for two reasons. First, the deal was retail targeted; second, Valtellinese largely funds itself through its deposit base, and arguably will not need to tap the hybrid market for future funding. Deutsche Bank’s move sets a precedent, since the bank is both a large user of the wholesale market, and since this deal was targeted at institutional investors.
Click the image below for an extract of SG’s list.