(Bloomberg) -- Deutsche Bank AG is working on a significant risk transfer tied to fund financing as the lender widens the range of assets it hedges via the booming securitization trade.
The Frankfurt-based lender is planning a potential transaction linked to a portfolio of about $2 billion of subscription lines, according to people familiar with the matter. Terms of the deal, including size, may change on the back of discussions with investors, they said, asking not to be identified because the information is private.
A representative for Deutsche Bank declined to comment.
While the majority of SRTs are used to offload credit risk on corporate lending, strong demand for the instruments is allowing banks to offer other forms of collateral. Subscription lines are typically short-term loans, helping private equity or credit firms to bridge the gap between making investments or paying expenses and calling on limited partners for cash.
Standard Chartered Plc has been working on an SRT tied to a portfolio of such loans. Earlier this year, Goldman Sachs Group Inc. and investors discussed a potential deal linked to a portfolio of subscription lines, while NatWest Group Plc has also considered a similar transaction.
Deutsche Bank Chief Financial Officer Raja Akram said in a call with analysts in July that the lender was planning new SRT platforms to create additional avenues to obtain regulatory capital relief. As of the end of the second quarter, SRTs provided balance sheet relief equivalent to 75 to 80 basis points of its core equity tier 1 ratio, he said.
On top of the planned sale of an SRT to hedge about $4 billion of large corporate loans, Deutsche Bank has been discussing an SRT tied to about €2 billion ($2.3 billion) of project finance debt, including loans for data centers. The lender has also been working on a deal tied to about €1.5 billion of loans to small and mid-size German enterprises.
--With assistance from Arno Schütze.
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