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July 2010 | ifr special report | 1 GERMAN CORPORATE FUNDING ROUNDTABLE


Marc Mueller, Deutsche Bank; Matthias Gaab, Deutsche Bank; Johannes Heinloth, BayernLB; Keith Mullin, IFR; Mathias Noack, UniCredit Group; Bettina Streiter, DZ Bank; Thomas Kull, WestLB; Olaf Sarges, UniCredit Group; Richard Curtis, WestLB.


Chair: Keith Mullin


Participants: Richard Curtis, WestLB Matthias Gaab, Deutsche Bank Johannes Heinloth, BayernLB Thomas Kull, WestLB Marc Mueller, Deutsche Bank Mathias Noack, UniCredit Group Olaf Sarges, UniCredit Group Bettina Streiter, DZ Bank


Event producer: Paul Nicholson Event organiser: Claire Sargent Head of production: Clive George IFR production manager: Rebecca Scott Advertising production manager: Gloria Balbastro (+44 (0)20 7369 7539) Client Services: +44 (0)20 7369 7594 subscriptions@thomson.com Front cover photo credit:


Reuters/Hannibal Hanschke ISSN 0953 0223


Printed by Wyndeham Grange Ltd © Thomson Reuters 2010 www.ifre.com


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The debt origination bankers participating in IFR’s German Corporate Funding Roundtable in Frankfurt on July 13 were a confident bunch, but they find themselves in an odd position. Large German corporates and utilities have been absent from the debt capital markets in 2010, having been active fundraisers at the back end of 2008 and through 2009. At the same time, loan market activity has been muted, as banks rework their banking relationships and rethink their approach to lending.


On the other side of the equation, cash-rich investors are keen to put money to work and are actively chasing opportunities to gain exposure to German corporates, even more so in light of the country’s flight-to-quality status from sovereign debt-induced volatility. German retail investors have re-emerged as a major driving force in the bond market. In parallel with this, the nationalisation of buying patterns has created enhanced demand for German paper, as the country’s large domestic investor base stays close to home to avoid credit problems in other parts of Europe. Adding to Germany’s allure, there are expectations that the country’s cost-competitive export-sector – benefiting from the weaker euro – will lead Europe out of its economic slump.


For the time being, the bond market is the market of choice for German corporates, particularly in an environment where disintermediation shows little sign of reversing. In the medium term, though, banks will come back into the frame and will compete more fulsomely for corporate funding. One line of thinking is that companies with capital markets access will use the bond market for their funding requirements, and use banks for unfunded back-up lines only. Companies that don’t have access to capital markets – Mittelstand companies – will continue to rely on bank loans; mid-cap companies also have access to the Schuldscheine market, which is an attractive option for retail lenders who have been squeezed out of the syndications market.


The absence of prime corporates from the bank and capital markets, combined with strong investor appetite, has given, mid-cap, unrated and sub investment- grade borrowers a rare opportunity to steal the bond market limelight. Over €20bn of supply has emerged from such companies so far this year as traditional market segmentation fades away and investors become comfortable with new names.


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