Investor rush for Rentenbank’s first US$ benchmark for 2021

Rentenbank is Germany’s development agency for agribusiness and rural areas. Under its statutory promotional mandate, Rentenbank provides loans at favourable interest rates for agriculture-related investments via other banks on a competitively neutral basis. In addition, the bank offers funding for banks, savings banks and local authorities operating in rural areas.

In 2020, Rentenbank, a federal public law institution whose capital stock was formed by contributions paid by the German agricultural and forestry sectors, increased its overall new promotional business by 3.5% to €11.2billion (€10.8billion in 2019) while funding of local authorities and banks operating in rural areas through registered bonds, promissory notes and securities grew from €4.8billion to €5.2billion.

Over the last year, Rentenbank raised €11.4billion in funds on the capital market, an increase of 11% compared to the previous year (€10.3billion). The development agency sought funding in various currencies in order to acquire the funds for its Promotional Business at as favourable a price as possible. For 2021, Rentenbank plans to raise approximately €11billion in medium- and long-term funding.

Rentenbank opts for US$1.75billion bond as demand soars

After closely watching the market to identify the best window for Rentenbank’s first US Dollar benchmark transaction in 2021, the NatWest team – in its role as Joint Lead Manager – and Rentenbank announced the 5-year benchmark issue in the third week of March.

With a comparative lack of US$ supply from similarly-rated names, investor demand came in with force, resulting in over US$2.1billion of indications of interest (IOIs) before the order books opened and books reached over US$2.6billion within hours as more high quality investors rushed to get a share of the transaction.

Even after Rentenbank tightened the pricing demand continued to grow, with the order volume totalling over US$3billion. On the back of this extraordinary support, the German development agency opted for a deal size of US$1.75 billion with a coupon of 0.875%.

The largest share of the offer went to central banks (40%), while asset managers took 32%, and banks came in with 27%. Investors are based all over the world: investors from the Americas took 36%, followed by Asia at 32%. European accounts took 14%; separately, German investors received 4%, while 8% went to the UK and 6% to the Middle East.

Rentenbank’s first US$ global benchmark of 2021 follows their successful $650million 7-year Regulation S deal in February.  It also represents NatWest’s second capital markets issuance for Rentenbank this year, following their €250million Green Bond in January. 

Kerr Finlayson, NatWest, Head of FBG Syndicate, commented on the transaction: “We’re delighted to have supported Rentenbank with their first US$ benchmark transaction for this year, and we’re very pleased with the incredible level of investor support received. This is especially impressive considering recent volatility in the USD space and is testament to the broad global appeal of the Rentenbank name.”

Nikola Steinbock, Divisional Board Member for Treasury and Promotional Business at Rentenbank, said: "Getting the timing right is crucial in a volatile market. We achieved this through superb close collaboration with our lead managers. This transaction topped off our funding activities in the first quarter of 2021."

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