Two weeks after announcing its intention to issue a crypto debt security, German lender Berlin Hyp has become the first bank to issue a digital Mortgage Pfandbrief structured on the basis of the German Electronic Securities Act and using blockchain technology.
The crypto debt security has a total size of €100 mln, a coupon of 2.75% and a term of three years. The re-offer yield was 2.783% and the spread mid swaps +15 basis points. The digital Pfandbrief is expected to receive an Aaa rating from Moody’s.
The Pfandbrief issuance is executed on a private and permissioned blockchain from SWIAT, a Frankfurt am Main-based business that develops software for financial market infrastructures. Its shareholders include DekaBank and LBBW, the two banks Berlin Hyp mandated as lead managers for the transaction. The settlement date is 6 August.
Teresa Dreo-Tempsch, member of the management board of Berlin Hyp with responsibility for capital markets business, said: 'We are extremely pleased about the issuance of our first Blockchain Pfandbrief. With today’s transaction, we have shown that the legal framework established by the eWpG also allows for issuing covered bonds in a digital format.
'We believe this represents a further milestone in the early stages of the development of the market for tokenised securities – and we want to continue to play an active role in this development in the future as well.'
Berlin Hyp was also able to get Metzler Bank on board as a key anchor investor even before the transaction was announced on 22 July. DekaBank is acting as the crypto securities registrar for the transaction. Both DekaBank and LBBW are entered for investors as holders of the Pfandbrief in the form of a collective entry.
Berlin Hyp relied on the expertise of White & Case LLP when obtaining legal advice on the Pfandbrief issue. DekaBank and LBBW will also act as market makers in the secondary market in order to provide liquidity, and to ensure that the Blockchain Pfandbrief can be traded on the OTC market throughout its term.
Berlin Hyp said it intentionally set a long time interval for the period between announcing the Pfandbrief and the execution of the deal in order to create an opportunity for extensive discussions and the exchange of information with investors and other market players.
