Deutsche Bahn (DBHNGR; Aa1/AA- Pos/AA+) desperately needed cash coming

DB has also commented on the €14.3b sale this morning reiterating sales proceeds to "significantly reduce debt". As we mentioned yesterday it could reduce debt by up to 40% but pro-forma leverage will still look worse; Schenker was one of its few profitable units. And to make things worse it was capex light. While it 'focuses on core business and strong rail strategy' it is the German government and in extension taxpayer that will do the heavy lifting to fund infrastructure spend.

It is facing a cheap reset on the front NC25 perp (Baa1/BB+) at 5Y Swap+126 vs. secondary at +210 - two-notch downgrades at both raters since issuance driving that gap. It will be callable every year after then. We don't see the perps pricing later calls (looks rich if so) and hard to know if DBHNGR cares; the €2b in perps are a drop in the ocean of debt and first perps it issued (both in '19) - but it is a frequent and heavy issuer in the snr market (reputational cost). S&P in early August said "we assume that the €2 billion hybrid instrument will be refinanced in due course, but expect more clarity on DB's intention to refinance by the end of the year."

DSV call concluded but we are surprised cash lines are weaker today (+2-4bps) - Reuters leak yesterday should have been taken as near fact and updates today are positive vs. worst case on funding. We flagged it as a aside BUT not a core concern when it came to issue the 29s in mid June (Maersk and few other names were bidding for Schenker at the time). Maersk dropped out first but it is when Saudi Arabia's Bahri fell out in Mid July (was reportedly coming in with highest bid) that the risk of DSV winning became quiet real (PE vs. public co fighting for a government asset).