Singapore – During Europe’s summer, Deutsche Bank closed Germany’s first ever ‘Schuldschein’ loan to a Chinese entity, creating a new loan market for Chinese local government operators and opening a new investment channel for German institutions.
Schuldschein loans are specific German law governed loan instruments which are used in the German market either for financing or investment purposes. They combine the flexibility of bilateral arrangements, the privacy of over the counter markets and the tradability of capital markets.
Chinese subway operator, Tianjin Rail, raised a total of €200 million with a tenor of 10 years, on its inaugural German Schuldschein loan financing in the German domestic loan market. Tianjin Rail Transit Group is the subway operator in the metropolitan area of Tianjin, a city in north-eastern China near Beijing.
The transaction highlights Deutsche Bank’s expertise in executing cross-border transactions, providing balance sheet to corporate issuers in international funding situations as well as genuine investment opportunities for its institutional investor franchise.
Schuldschein loans are treated like private placements. This placement represented the first Euro denominated assignable loan for the borrower, and was fully underwritten by Deutsche Bank Fixed Income and Currencies Europe to support a short time frame for issuance required by the borrower.
Deutsche Bank’s Co-head of Private Debt Syndicate Konstantin Kraus said: “Deutsche Bank teamwork between China and Europe, coupled with our long-time client understanding, enabled us to quickly develop a solution that met the client’s needs and opened a new market for Chinese government linked borrowers.”
Sam Fischer, Head of Onshore Debt Capital Markets at Deutsche Bank in Beijing said: “This transaction is another milestone for cross-border diversification and maturity extension for Chinese issuers.”
Hunter Xiong, Head of Belt & Road Initiative Office at Deutsche Bank, said: “This transaction opens a new foreign currency funding source for Chinese sponsors in long-term asset sectors like infrastructure and energy. We expect Schuldschein loans to become a valuable alternative international financing option for more Chinese sponsors, particularly for Belt & Road Initiative businesses.
Investors primarily comprise German banks, savings banks and insurance companies as a buy-and-hold investment. Investors are very familiar with the standards established in the Schuldschein markets and appreciate the compact documentation complemented by German civil law.