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Kreditanstalt fur Wiederaufbau launched the largest equity linked bond ever on Wednesday - a Eu4.5bn transaction exchangeable into shares of Deutsche Telekom.
After several months of recovery in the equity linked market, which was almost dead in the first quarter of the year, the deal is the clearest signal yet that issuers are waking up to the compelling terms they can obtain with convertible issues.
The prestige of the German state-owned bank as a triple-A bond issuer also lends a new respectability to the convertible market, which should encourage more companies to try the technique. Some blue chips have dismissed convertibles as suitable for lower grade borrowers.
"You couldn't ask for a better issuer and a better underlying company," said Martin Fisch, head of European equity linked origination at Deutsche Bank, which led the deal with JP Morgan. "This deal really does validate the equity linked market's position as a serious financing alternative."
But the most remarkable aspects of the deal were its sheer size - and the speed with which it was brought to market and gathered Eu8bn of demand from investors.
The exchangeable just pips Ford's $5bn convertible, issued early last year, as the largest global deal and smashes the European record of Eu3.5bn, set by France Telecom in 2001. If the Eu500m greenshoe is exercised, the bond will be the largest convertible by far.
Although this was the second Deutsche Telekom equity linked bond this year - after the telco raised Eu2.3bn through a mandatory convertible - KfW found enough demand to place the deal comfortably in one day.
"The previous two...