Dexia Kommunalbank Deutschland achieved a 25.63% take-up rate on a tender offer targeting some Eu10bn of public sector Pfandbriefe after investors holding Eu2.58bn of the eligible bonds participated in the buyback.

The issuer had set a cap of Eu3bn on the amount it would repurchase when it launched the tender offer on 23 April, but the volume of bonds tendered fell some Eu400m short of that.

The acceptance rate ranged from 18.9% for a Eu1bn 2.75% jumbo due 2016 to 36% for a Eu1.65bn 4.75% public sector Pfandbrief due 2018. The maturities of the targeted Pfandbriefe stretched from 2013 to 2018.

With some Eu129m of a Eu500m 2% June 2014 Pfandbriefe and around Eu150m of a Eu500m April 2015 issue repurchased, these bonds have fallen below the Eu500m mark and therefore drop out of indices, a risk that an analyst had highlighted when the tender offer was launched.

Fritz Engelhard, German head of strategy at Barclays, said that an acceptance rate in the 20%-35% range for the longer dated bonds was to be expected given attractive repurchase prices on offer, which were 20bp-40bp tighter than secondary market prices on the targeted bonds before the tender offer was announced.

Uncertainty about the future of Dexia Kommunalbank in the context of the restructuring of Dexia group will also have contributed to investors’ decision to tender bonds, added Engelhard.

“There are two main options, that the issuer will be sold or wound down,” he said.

Dexia Kommunalbank said that the buyback will reduce the need for overcollateralisation and therefore also reduce the need for senior unsecured funding, and that the repurchase is neutral from a liquidity standpoint taking into account the bank’s 2012 cashflows and reduction of overcollateralisation.

“This offer was motivated by the possibility for DKD to adjust more finely the asset and liability redemption profile of the Pfandbriefe versus the public sector assets held by DKD given the current absence of new asset origination,” it said.