Commerzbank AG bought back more hybrid capital from investors than the company had initially planned as Germany’s second-largest lender fights to bolster capital and avoid a second taxpayer-funded rescue.
Commerzbank will spend about 643 million euros ($835.2 million) to repurchase a nominal 1.27 billion euros of securities, the Frankfurt-based company said today. That’s more than the 600 million euros the bank said on Dec. 5 that it intended to spend. The transaction will boost core Tier 1 capital, a measure of financial strength, by more than 700 million euros, according to the company’s statement.
The hybrid capital combines aspects of debt and equity and allows borrowers to cancel interest and principal payments without triggering a default. European leaders are calling on banks to raise capital and bolster confidence in the industry after financial companies agreed to take losses on Greek debt.
Commerzbank, which has the largest capital requirement of six German banks deemed to have a deficit by regulators, offered to buy back hybrid instruments that trade below face value as part of its measures to avoid taking state aid. It targeted five different securities at prices ranging from 52.5 percent to 40 percent of their nominal value.
The lender, which needed a government bailout after the credit crunch in 2008, must raise 5.3 billion euros in capital by the middle of 2012 after marking down the value of its sovereign debt in a European stress test. The lender is trying to lower costs, shed assets, sell businesses and retain earnings to reach capital requirements without tapping public funds.
The tender offer period started Dec. 5 and ended yesterday. Joint dealer managers for the offer were Commerzbank, Credit Suisse Group AG and JPMorgan Chase & Co.