Kreditanstalt für Wiederaufbau (KfW), the German state-owned development bank, launched the world’s biggest convertible bond to raise finance to offset planned government tax cuts. So successful was the deal that the e4.5bn bond sold out within just six hours. A e500m green shoe (provision for extra shares) was exercised within three days of the launch.
Following an accelerated bookbuilding, which was nearly two times over-subscribed, the coupon was set at 0.75% and a conversion premium of 38% over the stock’s reference price of e12.70.
The announcement initially sent Deutsche Telekom’s stock 4.7% lower, but the shares recovered to close at e12.87, a loss of just 2.9%. “Deutsche Telekom is among the most liquid and widely followed stocks in Europe. Deutsche Telekom combined with the AAA strength of KfW was a dream combo, and allowed us to draw in the broadest spectrum of investors, achieving a record-smashing deal size, while still trading well in the after-market,” said Martin Fisch, head of equity-linked origination (Europe) at Deutsche Bank.
