- Deutsche Bank’s $750 million bond was led by six firms led by women, people of color, and veterans.
- As joint lead managers, these firms built investor orders for the deal and pocketed greater fees.
- More companies are appointing minority-led firms to promote equity on Wall Street.
- See more stories on Insider’s business page.
When markets opened Tuesday and Deutsche Bank announced a $750 million bond sale, dealmakers would have been forgiven for thinking it was just another regular investment grade transaction.
But for the first time, Deutsche appointed financial institutions that are service-disabled and veteran-owned, or operated by women or people from communities of color, to not just participate in the deal, but lead the effort alongside the German bank’s own syndicate desk.
Typically, firms opt for the usual suspects, from large, money-center banks such as Citi or Bank of America to household investment banking names like Morgan Stanley and Goldman Sachs conduct their bond sales. But Deutsche’s move comes as companies increasingly turn to minority-owned investment banks to coordinate bond sales to attract new investors into transactions and to highlight their own commitment to diversity and inclusion initiatives on Wall Street.
And importantly, Deutsche’s decision to mandate Academy Securities, CastleOak Securities, Loop Capital Markets, Mischler Financial Group, R Seelaus, and Siebert Williams Shank as joint lead managers was a signal that these smaller firms can not just participate in these transactions, but lead bond deals for the capital markets’ biggest borrowers.
As joint lead managers, the minority-led investment banks picked up extra responsibilities throughout the bond sale and, crucially, earned greater fees for their work than they typically would in a lower-tier role such as co-manager or arranger.
“We wanted to make them a full partner in this process. Their conversations with top-tier investors puts them in a different place compared to a typical co-manager role,” Jeanmarie Genirs, Deutsche Bank’s head of US investment grade syndicate, told Insider. “It’s elevated their stature on this specific transaction and overall in their relationships with bond issuers.”
In addition to the six joint lead managers, AmeriVet Securities, Bancroft Capital, Capital Institutional Services Multi-Bank Securities, and Roberts & Ryan Investments were named co-managers on the deal, Deutsche said.
The full group of minority, women, and service-disabled veteran firms will receive roughly 60%, or $1.1 million, in fees. This compares to an approximate average of 20% in fees for minority-led firms that have worked in lower tier roles, Genirs said.
The $750 million transaction was offered at a rate of 1.45% and will mature in March 2025.
This deal is ‘much more than a mere icon on a prospectus cover for our pitch books.’
Through mid-March, the top 10 firms led by minorities had participated in roughly $136 billion worth of US investment grade bond sales, approximately 43% of the year’s deal flow, up from 33%, or $95 billion, during the same time period last year, according to Refinitiv data. For 2020, minority-led firms helped arrange about 29%, roughly $814 billion, of US investment grade deals.
“This transaction represented much more than a mere icon on a prospectus cover for our pitch books,” said Ronald Quigley, a managing director who runs the fixed income syndicate at Mischler Financial Group. “We’ve earned the right as a joint lead manager to get into the weeds on such a transaction.”
Indeed, investor orders peaked at $1.8 billion for Deutsche Bank’s new deal with over 100 investors expressing interest in the transaction, according to Deutsche’s Genirs, underscoring these smaller firms’ ability to mix with the biggest banks on landmark transactions.
Each joint lead manager will earn 7% of the underwriting fees apiece.
Deutsche joins other blue-chip companies including Citi, General Motors, Verizon, and PepsiCo in appointing diverse underwriting groups to their recent bond deals. As more transactions get done amid receptive investor audiences, the hope is that more firms will look to these smaller, experienced sections of Wall Street for their future bond deals.
“There are people at these firms with outstanding expertise and our engagement with them this week was testament to that,” said Genirs. “And with additional opportunities, maybe this can propel their firms even further.”
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