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March 15, 2006

Commerzbank successfully issues hybrid capital

Commerzbank has made a successful debut in the hybrid capital market, issuing an overall amount of around 2.2bn euros. The two subordinated bonds with a volume of 1,000m euros and 800m pounds, respectively, were placed with institutional investors. In the first ten years of their perpetual maturity, the euro tranche will have a premium of 115 basis points over a corresponding euro swap rate, while in the first twelve years the premium of the sterling tranche will be 150 basis points higher than a comparable British government issue. After these dates, the bank will have the right for the first time to call the bonds. If it does not exercise this right, the bonds will subsequently have floating interest rates with a step up of 100 basis points.

Dr. Renate Krümmer, head of the bank's strategy and controlling department and responsible for the issue, was delighted with the positive market response: "Demand for the two tranches was exceptionally brisk. All told, the syndicate received orders amounting to over 6bn euros. The transaction is the largest issue of hybrid capital by a German bank, at the same time a market leader for issues of this kind in the two currencies euro and sterling. We have easily secured our target of a Tier 1 capital ratio of more than 6.3% after Eurohypo is consolidated as planned at the end of the first quarter of 2006. This will also give Commerzbank scope for further action after acquiring Eurohypo."

Commerzbank expects the issue to be given ratings of A- (Fitch), Baa1 (Moody's) and BBB (S&P's). The banking syndicate is made up of Deutsche Bank, Dresdner Kleinwort Wasserstein, Morgan Stanley and Commerzbank.

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