Investors back high-quality NORD/LB credit portfolio “Northvest”
- Investors investing in the bank’s new business model with new credit product
- Transaction releases up to EUR 400 million of equity
NORD/LB Norddeutsche Landesbank is offering institutional investors the opportunity to invest directly in the bank’s credit-based business model. In March it issued a securitisation tranche of an extensive credit portfolio comprising four asset classes from the books of NORD/LB.
The transaction is based on a reference portfolio of around 5,000 high-quality loans with a total volume of EUR 11.4 billion, which NORD/LB structured in its “Northvest Credit Investment Platform”. It includes loans from four asset classes: aircraft, renewable energy, commercial real estate and German SMEs (small and medium-sized enterprises). International institutional buy-and-hold investors purchased a tranche of securitised credit risks in the amount of EUR 450 million via a specialist investment manager. The parties have agreed not to disclose the terms. The other tranches will remain with NORD/LB, which will also continue to be the contract partner for its borrowers.
“We have taken a deliberate decision not to sell any loans from our books, but to target investors who would like to share in the credit risks. The high quality of our credit book makes this possible. We are finding partners who are impressed with the quality of our assets and want to invest in a good risk profile,” explained the Chairman of the Managing Board of NORD/LB, Dr. Gunter Dunkel.
“With Northvest we have developed an interesting and attractive product for institutional investors who, in the current period of low interest rates, are looking for alternative investment opportunities,” underlined NORD/LB’s Board member for Capital Markets, Dr. Hinrich Holm. “We are offering investors for the first time the opportunity to invest directly in our widely diversified and highly specialised business model. Due to the high quality of our credit assets we were able to achieve an attractive interest coupon,” explained Holm.
The Northvest transaction was preceded by a due diligence examination by the investors in which the quality of the assets included was examined without the identity of individual customers being disclosed. “It is a lesson learned from the financial crisis that such products not only have to have a high asset quality, but also have to be structured clearly and transparently. This also includes regular and detailed reports about the portfolio’s progress,” explained Holm. The unusually high diversification of the credit portfolio across four asset classes that are independent of each other is unprecedented in Germany and ensures an attractive risk-return profile.
The transaction is being managed by the risk management company Caplantic Alternative Assets GmbH. Caplantic GmbH, which is based in Hanover, is a joint venture between NORD/LB and Bankhaus Lampe. It was already involved in the due diligence process and will look after the interests of investors with the independent risk management of the credit pool.
The Northvest transaction is a further component of NORD/LB’s capital-boosting strategy. With this issue the bank can reduce its risk assets by around EUR 4 billion and release around EUR 350 to 400 million of equity.
“Across the Group, NORD/LB is developing new investment opportunities for institutional investors which release capital and at the same time broaden its scope for targeted new business,” emphasised Holm. The Northvest-transaction is not the first credit product issued by NORD/LB. In August 2012 a mezzanine tranche of a high-quality NORD/LB credit portfolio of 20 British infrastructure projects was issued under the name of “Blue Rock” to an institutional investor. In September 2013 the NORD/LB subsidiary Deutsche Hypo also concluded a new type of framework agreement with Bayerische Versorgungskammer which will participate with a volume of EUR 500 million in future Deutsche Hypo real estate loans.
With total assets of EUR 205 billion, NORD/LB Norddeutsche Landesbank is a leading German business bank. Its core business segments include corporate customers business, structured financing in the energy and infrastructure sector, ship and aircraft financing, commercial real estate financing (via Deutsche Hypothekenbank), capital market business and private and commercial customers. The bank has registered offices in Hanover, Braunschweig and Magdeburg and branches in Düsseldorf, Munich, Hamburg and Schwerin. With Braunschweigische Landessparkasse it has an extensive presence with more than 100 branches. Bremer Landesbank is also part of the NORD/LB Group. NORD/LB is represented outside of Germany by a subsidiary in Luxembourg and branches in London, New York, Singapore and Shanghai.
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