December 2008 | ifr special report | 11 PFANDBRIEFE ROUNDTABLE “
It is essential that whoever is
first has a good secondary performance. This means it is important to get the right combination of issuer and spread, with the work put in before the deal, conducted quickly enough but also with the right partner banks.
So I strongly believe everyone is ready, but nobody has clear cut plans. We know exactly what we want to do next year: jumbo if possible, fine; if not, that is still okay.
Huber : There are a handful of banks that could open the market, but headline risk is very important. You can't prepare transac- tions in three or four weeks, so you really need to prepare it with non deal-related investor actions: roadshows, visits and marketing. It might be necessary to wait until January or February to see how 2008 was for your bank: once figures have come out it will be possible to present that to investors to boost confidence in order to get a successful transaction placed.
Bertram : January or February is relatively optimistic. Some of the issuers may not have their preliminary figures until around the end of March or April. We expect to have something by mid-February.
Pimper : There is a lot of work for you to do from an investor relationship perspective. It's very important that you go out with those numbers and tell the story of the Pfandbriefe again and again – and possibly not only to the old investor base, but to potential new investors, to try and bring them on board.
Huber : For the first transaction it's very important to show the traditional investor base what's going on. Many of them have suffered a lot, and winning them back is a vital first step. When you can show new or international investors that your home
Fritz Engelhard, Barclays Capital
base is there, that they will believe in you again, this will be crucial in winning over those new investors.
Dahmer : I totally agree with what has been said. There are a handful of names that could reopen the market. Headline risk is important, and a number of names will want to be the first, but on the other hand there will be a big portion of investors unwilling to participate in the first transaction, who will just wait to see how the deal performs in the secondary market.
In other words I think it is essential that whoever is first has a good secondary performance. This means it is important to get the right combination of issuer and spread, with the work put in before the deal, conducted quickly enough but also with the right partner banks: banks that are committed to the product and have the balance sheet, preferably those who are not in the midst of a merger or another situation, that are likely to generate negative headlines.
Bertram : Who is going to be the first German issuer coming out with a state guaranteed issue? I believe the need to explain the business model is less important than investor observations of the performance of an issue. I think what we will see in the German market will be like what you see in the UK market: people are relatively hesitant to buy unless they have seen it performing well and showing stability. When we have a nice spread tightening there will be more investors coming in.
Dahmer : Pfandbrief issuers have been successful in coordinating issues. Unlike what we saw in Spain, there has not been the scenario of issuers jumping ahead of each other, or a glut of issuance in one week.
Engelhard : It is not my place to call which institution will be the next to issue but I have a more general comment: two months ago I would have said it would be the first to accept the new pricing environment that would issue first. These days I think it is less a factor of at what price you come at. It isn’t even so much a question of selling your story and communicating how good you and the product are: we have seen in this environment how explicitly government guaranteed debt has faced problems in getting funding done. I think primarily it will be a function of timing.
I agree with Horst: we will see the first German state guaranteed bonds priced in the market, and only then will we potentially see some other German Pfandbriefe on top of that.
Dahmer : I was recently on a panel where somebody said something memorable about the need more transparency on what is in the cover pools. We have to agree on the past to make sure we can disagree in the future: in other words we can trade in the future. It is very, very important to have as much disclosure as possible to current investors. I appreciate 100% disclosure doesn't make any kind of sense, but having as much disclosure as possible regarding what kinds of assets you have in the pool is definitely helping such transactions.
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