Deutsche Bank Buys Back More Than $5 Billion in Debt

Frankfurt-based German banking and financial services provider Deutsche Bank AG have recently announced plans for a bond buyback of $5.4 billion in debts it has sold to investors. Investors who bought debts in the last month, however, are now criticizing the bank for not fully disclosing aspects of its financial status until after the most recent bond sales were complete.

The move to buy back the bond debts has sparked investor confidence in the banking giant, sending its stock price up by nearly 9 percent in a single day following the announcement. According to Deutsche Bank CFO Marcus Schenck, the bank is taking advantage of current conditions in the bond market to buy back the bonds at a rate lower than those at which they were originally issued, thus turning a profit in debt reduction. The bank’s debt burden has been one cause of concern for investors, especially following a total loss in excess of $7 billion in 2015. However, the buyback has bolstered investor confidence by showing that the bank can still make good on the debts that it holds while maintaining all of its current operations.

However, at least, one group of investors, those who purchased bonds during a $1.75 billion issue in January, were not so pleased. These buyers purchased their share of the debt of Deutsche Bank prior to the announcement of 2015’s large losses and have since criticized the bank for purposefully selling the debt before it made the loss public in order to make the bonds more appealing. These investors have expressed outrage and are said to be in the process of demanding that they are given priority consideration during the buyback program, allowing them to liquidate bonds that they would not have purchased if they had been aware of the full financial situation of the bank.

The buyback program is set to encompass $3.4 billion in euro bonds and $2 billion in dollar bonds, to be bought back through two separate programs. The buying period for euro bonds is planned for one full week, whereas the dollar bonds can be sold back to the bank for up to a 20 day period. Whether or not the priority will be given to bondholders who purchased from the January issue has yet to be determined, but a meeting of these investors is set for next week to determine how to proceed. A press release issued by Deutsche bank stated that the buyback will have no impact on the structure and allocation of funding that had already been planned for 2016.