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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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Aareal Bank (AARB: Baa1/BBB+) is isusing a green senior non-preferred, we would see a mathematical fair value at MS+170-180bp area but we fear this is based on poor comps and fails to address the risks in this issuer. As a results, we’d see something in the low-200s, perhaps MS+220bp area but with a huge confidence interval.
- Aareal Bank is issuing a EUR500m WNG 2Y green senior non-preferred with IPT at MS+280bp area and books reported above EUR750m. Expected ratings Baa3/BBB.
- Aareal, like peer DePfa, has been caught at the centre of boththe German and US CRE issues of late, though recent results (15-May) were positive, showing a good improvement in non-performers. Recent price action (both credit and equity of DePfa) have been positive.
- Aareal’s existing SNP curve isn’t useful so we’ve looked at three other banks (BPER, Mediobanca and Sabadell) which are relatively rare in having good SP and SNP EUR curves. There’s only around a 10bp (or 20-25% premium for the step-down in rank).
- Aareal’s SP curve trades around 90bp wide of these peers, in SP terms. Grossing that premium up for the step-down in rank, we get to c.110-120bp premium that we’d look for, in SNP terms. Using that premium over their observed SNP curves would give a fair value around MS+170-180bp. Sadly, in this relatively high risk situation, we’d see a good safety margin needed over what’s mathematically justifiable, so would look into the low-200s.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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