Deutsche Pfandbriefbank AG is working on a debut significant risk transfer tied to billions of dollars of US commercial real estate loans, according to people familiar with the matter, as the German lender seeks to exit the US market.
The Garching-based bank is sounding out investors about the potential transaction, the people said, adding that talks are at an early stage so the terms remain subject to those discussions. They declined to be identified as the matter is private.
In June, PBB said it would discontinue its US business completely and planned to wind down, securitize or sell a portfolio of about €4.1 billion of US commercial real estate loans. Earlier this month it booked €314 million in charges linked to its decision to exit the US.
A PBB representative confirmed the lender is working on an SRT, without providing details of the transaction.
PBB’s US expansion ultimately proved damaging to its balance sheet. Having built a massive portfolio of US commercial real estate loans, the push backfired when the era of low interest rates ended, hitting office property prices in the US.
SRTs allow banks to insure loans against default by selling credit-linked notes to pension, sovereign wealth and hedge funds. That means banks are able to bolster their solvency ratios, or free up capital they’d otherwise use to meet regulatory requirements.
PBB rival Aareal Bank AG has been also working on a potential SRT linked to a portfolio of about €1.5 billion of commercial real estate loans, Bloomberg reported in June.
The global SRT market could expand 11% annually on average in the next two years, according to a recent Bloomberg Intelligence survey. UBS Group AG and ING Groep NV are other lenders discussing or finalizing such deals.
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