The liabilities of the Depfa group could be further reduced in the coming months, winding-up institution FMS Wertmanagement announced on Friday, potentially affecting the cover pools of the former issuer and the liquidity of its covered bonds – of which some Eu3bn has been repurchased since a January tender.

In January, FMS Wertmanagement (FMS-WM) – the German government’s winding-up institution for the nationalised Hypo Real Estate Group, of which the Depfa group was a part – launched a cash tender offer for eight covered bonds in four currencies with Eu3.3bn outstanding issued by Depfa ACS Bank and Depfa Pfandbrief Bank International – subsidiaries of Depfa Bank plc.

FMS-WM announced on Friday that it has to date purchased Depfa ACS covered bonds with an aggregate nominal amount of around Eu4.8bn and Depfa PBI covered bonds of around Eu800m, totalling around Eu5.6bn. FMS-WM said that around Eu2.6bn of this total was purchased under the public tender offer, which concluded on 1 February, while a further Eu3bn has been acquired through bilateral agreements with investors.

The results show that FMS-WM has fully repurchased seven Depfa covered bonds, while eight that have been subject to buybacks are still outstanding across euros, Canadian dollars, US dollars and Swiss francs.

Percentage holding by FMS-WM of Depfa Group covered bonds

Source: FMS Wertmanagement

FMS-WM added that, jointly with Depfa Bank plc, it also now holds 100% of Depfa’s hybrid capital, with an aggregate nominal value of Eu1.2bn.

FMS-WM said that the purchases Depfa’s various debt instruments is aimed at enhancing the wind-down of Depfa on an accelerated basis.

“It can be expected that in a next step, in cooperation with FMS-WM, Depfa Group’s liabilities could be reduced and the cover pools of Depfa ACS and Depfa PBI adjusted accordingly,” the institution said. “Depfa and FMS-WM will work over the coming months to implement this strategy.

“Such strategy may affect the future market liquidity of the outstanding securities issued by Depfa ACS and Depfa PBI.”

FMS-WM added that it will with Depfa assess further measures to support the accelerated wind-down of the group, and said this may include a removal of ratings where there is no contractual requirement to maintain such ratings.