SOURCE: Adam Friedman Associates

February 27, 2014 09:22 ET

Adam Friedman Associates Announces Discussions Among Holders of Preferred Securities and Potential Bidder for DEPFA

NEW YORK, NY--(Marketwired - Feb 27, 2014) -  Adam Friedman Associates announced today that certain holders of substantial amounts of each of the Preferred Securities (the "Holders") announced today discussions have been held with financial institutions considering bidding for DEPFA (collectively, "Bidder A") as part of the proposed sale of DEPFA announced by Citigroup Global Markets Deutschland AG on or about August 26, 2013.

On or about January 14, 2014, discussions commenced between the parties. Discussions concluded near the end of January without the parties reaching an agreed framework or price for a transaction. Those discussions focused on proposals for the redemption of all of the Preferred Securities in exchange for new consideration following the purchase by Bidder A of 100% of the common equity of DEPFA (assuming Bidder A were to be the successful bidder in the sale process).

After multiple rounds of discussions, the Holders had suggested a transaction that included 61 cents of consideration in the form of cash or cash equivalents including up to 37 cents in a new, short-dated, unsecured bond issued by post-sale DEPFA (with a duration no longer than 18 months and a coupon designed to have the instrument trade at par or above) and 12% pro forma of the fully diluted common equity of a post-sale DEPFA. Bidder A had offered 59.5 cents of consideration in the form of cash or cash equivalents including up to 37 cents in a new, short-dated, unsecured bond (the same as described above) and 11.33% pro forma of the fully diluted common equity of a post-sale DEPFA.

Under both proposals: (a) no payment was to be made in respect of accrued distributions on any of the Preferred Securities; (b) the Holders and certain other institutional holders of the Preferred Securities would commit to support the proposals on an exclusive basis; and (c) the support of 50.1% of each of the 6.5% Securities, the CMS Securities and the 5.029% Securities would be required to cause acceptance of a definitive proposal. A proposal by Bidder A providing Preferred Security holders the option to put the common equity issued to them under this proposal back to Bidder A for a price of 3.5% of face value per Preferred Security was considered at different stages of the discussions.

Following numerous discussions, Bidder A introduced the concept of a transaction similar to those described above involving cash and cash equivalents and a percentage of the fully diluted common equity of a post-sale DEPFA only to the holders of the 6.5% Securities and the 5.029% Securities at a slightly higher price for those two securities than previously discussed. However, there were no discussions on the terms of this proposal because the Holders viewed the proposal as not viable due to numerous considerations including legal, regulatory and timing issues.

Moelis & Company is acting as financial advisor to the ad hoc committee.

EUR 400,000,000 6.50 per cent. Guaranteed Non-voting Non-cumulative Perpetual Preferred Securities issued by DEPFA Funding II LP (ISIN: XS0178243332) (the "6.5% Securities")

EUR 300,000,000 Fixed Rate/Variable Rate Guaranteed Non-voting Non-cumulative Perpetual Preferred Securities issued by DEPFA Funding III LP (ISIN: DE000A0E5U85) (the "CMS Securities")

EUR 500,000,000 Fixed Rate/Floating Rate Guaranteed Non-voting Non-cumulative Perpetual Preferred Securities issued by DEPFA Funding IV LP (ISIN: XS0291655727) (the "5.029% Securities")

all guaranteed by DEPFA Bank plc (together the "Preferred Securities")

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    Adam Friedman
    Principal, Adam Friedman Associates
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    Phone: 914 419 7384