Deutsche Bank AG paid one of the largest fees ever paid to banks managed by women, minorities and veterans for help in overseeing its recent bond sale as diverse firms take on more significant roles in debt offerings.
According to a Deutsche Bank spokesman and the dealing documents, more than 60% of the fees were divided among a group of 11 banks including joint lead managers Academy Securities, CastleOak Securities, Loop Capital Markets, R. Seelaus Co. and Siebert Williams Shank. This compares to an industry average of 20% or less in recent years for lower paying companies which tended to serve mostly in diverse co-manager roles.
This is very indicative of the trajectory of ascending roles for diversity and inclusion firms, said Spencer Wilcox, a veteran of the Navy who now serves as the Head of Debt Capital Markets at the Academy. We 're approaching these ancillary roles.
Banks with diverse ownership have been making inroads in the U.S. corporate bond market that has long been dominated by the likes of Citigroup Inc. and JPMorgan Chase Co. Companies are increasingly incorporating diversity and inclusion goals into their capital markets activities, particularly in the wake of racial justice protests that swept the US last year.
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Deutsche Bank closed 750 million bonds by its New York branch on Tuesday, and the deal was issued Thursday. The four-year non-preferred notes, which ca n't be bought back for three years, are priced at a spread of 112.5 basis points over the Treasuries, a minimal concession to its outstanding debt.
As separate lead managers, the diverse firms were included in every aspect of the transaction from call for whether the deal would move forward to building orders with investors and pricing, said Jeanmarie Genirs, head of the U.S. investment-grade syndicate at Deutsche Bank.
We sat around a virtual table to figure out how we could really increase diversity and inclusion in Wall Street, Genirs said. You can always raise the money, but the other part was to help raise the profile of investors and issuers with investors and investors.
Diverse firms not only pride themselves on their own goals, but also tend to cater to investors with backgrounds similar to their own, which helps issuers distribute bonds across a wider range of the market.
By meeting on the ground to determine if a transaction will go forward, known as go-no-go calls, the diverse firms got a closer view of the discretion that issuers use in timing their transactions, said Academy's Wilcox. This was particularly valuable given the backdrop earlier this week, when of some of the world's biggest banks were serious losses related to the implosion of Archegos Capital Management. The offer from Deutsche Bank, which managed to ward off much of the tumult, would have gone on Monday, but was held until Tuesday to allow the market to process the headlines, Genirs said.
Financial issuers, some of the most diverse borrowers, have led the way in including numerous firms in their underwriting groups. Citigroup acted solely with Black firms to distribute$ 2.5 billion of bonds in January, while Bank of America and Goldman Sachs Group Inc. hired the diverse firms to help underwrite their respective bond sales in March.
I give these big banks a lot of credit for folding over forwards to be more inclusive, said Leslie Graves, co-head of origination and syndicate at women-owned Seelaus. It does n't feel that way, they really are committed and it's not a one-time thing.
As banks follow the effort, corporate issuers take notice and take suit, said Wilcox. It's already been happening- Google parent Alphabet Inc. paid record absolute fees to diverse underwriters in a$ 10 billion bond sale in August, while Allstate Corp. hired in November solely banks owned by minorities, women or veterans for its$ 1.2 billion bond sale, the biggest corporate deal yet managed only by diverse firms.
When Wall Street sets the standard, corporates tend to follow, Wilcox said. It sends a very broad signal to the marketplace.
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