Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • Consultants
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • SECURE 2.0
    • Special Reports
    • Washington
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2023
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
Breadcrumb
  1. Home
  2. Investments
January 10, 2019 12:00 AM

Danske bond sale is upended as laundering case keeps growing

Bloomberg
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Danske Bank had set aside this week to talk to bond investors and persuade them to buy its debt despite its role in Europe's biggest money laundering scandal. The bank knew it was going to have to pay a bit more, but had braced itself and just wanted to get started.

    But then, a string of bad news upset that agenda.

    Denmark's biggest bank is at the center of a $230 billion dirty money case, with multiple criminal investigations already under way and potentially hefty fines ahead. Now, investors are facing more bad news. On Thursday, Hermitage Capital Management founder Bill Browder is planning to present "new information" on the laundering case during a briefing in the Danish parliament. That comes amid news that Danske is being sued by a U.S. pension fund over the case.

    Against that backdrop, Danske has decided to delay its planned bond issuance until there is more clarity on what emerges from the Browder briefing. "With massively oversubscribed books, the responsible thing to do as an issuer was to put the bond sale on hold and wait until what comes out of the press conference," Christoffer Mollenbach, head of treasury, said in an interview Thursday. "I'm hoping we can make the decision today on whether to proceed with the bond sale or not," he added.

    Shares in Danske, which slumped 47% last year, fell as much as 3.7% Thursday, putting the bank on course for its worst trading day so far in 2019. Both Deutsche Bank and RBC Capital Markets lowered their price estimates for Danske in sector reports on Nordic lenders published Thursday.

    The cost

    On Wednesday, Danske started marketing two benchmark-sized tranches of non-preferred senior notes in U.S. dollars with maturities of three and five years, according to the person familiar with the issuance, and was set to pay up considerably more than it did for similar notes just last year.

    The bank is said to have been offering the five-year notes at 285 basis points above rates on U.S. treasury bonds Wednesday, compared with just 120 basis points on a similar maturity bond last year, before investors had absorbed the full scale of the laundering case.

    Danske acknowledged earlier this week it expects the scandal to increase the cost of borrowing for the bank. "We'll be paying up and we understand that," Mr. Mollenbach said then. He also said the bank had invested a lot of time to talk to clients and investors to assuage their concerns about the fallout of the laundering scandal.

    Danske wants to issue 40 billion kroner ($6.1 billion) in non-preferred senior notes this year, which will make up roughly half 2019's total debt issuance, in an effort to meet European requirements for debt that can be bailed in.

    Digesting the scandal

    Investors spent much of last year trying to keep up with the constant barrage of bad news around Danske. Just before the end of the year it issued a profit warning due to weak markets. In the laundering case, preliminary charges have been brought against the bank in Denmark. And Estonian police detained 10 former Danske employees suspected of knowingly helping criminals from Azerbaijan and Georgia launder their money.

    The scandal cost Danske almost half its market value in 2018. Estimates for fines have ranged from below $1 billion to over $8 billion. Danske was told by its regulator to have at least $1.5 billion extra in so-called Pillar 2 capital to handle the fallout of the scandal, but the bank had almost double that amount late last year and is continuing to build the surplus buffer. It can also draw on other reserves, and the regulator has made clear it considers the bank well capitalized.

    Waiting for a CEO

    Meanwhile, investors are waiting to learn who will run the bank on a permanent basis. Thomas Borgen was ousted as chief executive officer for his role in the scandal, but the board's preferred candidate to replace him was rejected by the regulator. Danske's former head of its Danish banking operations, Jesper Nielsen, is serving as CEO on an interim basis.

    The biggest concern that the bank has had to address is whether its core business will be hurt, Mr. Mollenbach said.

    "The feedback from most investors has been that as long as the core franchise is there, we should be able to absorb a fine," he said. "That's their conclusion, because we can't say anything about the fine."

    Barclays Bank, Bank of America Merrill Lynch, Danske Bank, Goldman Sachs Group, JPMorgan Chase & Co. and UBS Group were hired to arrange the sale.

    Related Articles
    New Jersey posts 15% return in 2017, divests Danske Bank over Israel boycott law
    Danish fund suspends investments in Danske Bank
    Polaris, Acathia to buy Danica Pension Sweden from Danske Bank
    Union pension fund sues Danske Bank, alleging securities fraud
    European Commission probing collusion among 8 banks to fix bond prices
    Pension funds with $210 billion look past scandal and buy Danske stock
    Recommended for You
    Greg Medcraft
    Search for yield in low-return future dominates conference
    CITIC Capital Partners closes $2.8 billion China buyout fund
    CITIC Capital Partners closes $2.8 billion China buyout fund
    Africa's biggest fund manager sees gold boom in West Africa
    Africa's biggest fund manager sees gold boom in West Africa
    Multiple Tailwinds Propel Private Credit
    Sponsored Content: Multiple Tailwinds Propel Private Credit
    Sponsored
    White Papers
    2023 Hot Topics in Retirement and Financial Wellbeing
    Bonds: Shaken, but Not Stirred
    Today’s rate cycle and US equities in target date portfolios
    A Study of Allocations to Alternative Investments by Institutions and Financial…
    Unlocking Hidden Value in Japan
    The Art of the Possible in Data Automation for Institutional Investors
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • Consultants
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • SECURE 2.0
      • Special Reports
      • Washington
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2023
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars