From: Vahe Stepanian

From: Vahe Stepanian To: Jeffrey Epstein <jeevacation(i/Jgmail.coin> CC: Daniel Sabba < , Ariane Dw er Morris Stewart Oldfield Subject: Fixed Income Follow-Up [C] Date: Wed, 18 Nov 2015 20:52:19 +0000 Attachments: Petrobrass _Buy_the_17s_DB_Research.pdf >, Paul Classification: Confidential Jeffrey - Paul sent along the email you sent to him yesterday (included below) and we worked together to come up with a few ideas that may be relevant. Please let us know if you have questions. Thank you, Vahe 1) Buy Petrobras '17s. Rationale: • Since May 2015, Petrobras 10yr spreads have widened by —400bps and in September S&P downgraded Petrobras to BB • In October, domestic fuel prices increased and Petrobras announced significant capex and opex cuts for 2015 and 2016. These can be seen as positive signs for the company's future, but may not mitigate its large long term funding gap: Petrobras will need to roll $60bn and $104bn of debt maturities in the next four and nine years respectively and sovereign support is not guaranteed • DB's Brazil credit analyst believes that the company can meet its short term debt maturities through 2017 without resorting to direct support from the government. DB has revised its forecasts and has upgraded the 3.25% and 3.5% '17s to a Buy rating (please find attached DB Research report). The bonds are currently yielding 7.06% and 7.10% respectively • Petrobras is one of the largest integrated oil companies worldwide and aims to be one of top 5 globally by 2030 Indicative Terms (as of 11/17/2015): Client buys Maturity Amount O/S Rating Price Mid Yield Client buys Maturity Amount O/S Rating Price Mid Yield PETBRA 3.250% Notes '17 03/17/2017 $1.6bn Ba2 / BB / BBB- (Mdy/S&P/Fitch) 95.25 7.06% PETBRA 3.500% Notes '17 02/06/2017 $1.75bn Ba2 / BB / BBB- (Mdy/S&P/Fitch) 95.875 7.10% EFTA00840385 We are happy to also speak about other HY names. 2) We have also been looking Contingent Convertibles bonds, which have been issued post-crisis primarily by European banks as securities that absorb losses when capital of the issuing bank falls below a certain level (i.e. trigger). Two such examples that we've highlighted: SocGen 6.00 2049 (Offer Px- 95.51, YTC - 7.26%) • The bond is a non call 5y (NC5) structure with first call date on 01/27/2020, after which it floats to USSWS + 4.067%. Post first call date, it is callable every five years • Using the forward curve, the yield to perpetuity is - 7.00% (assuming it is not called) • Principal Trigger: The Common Equity Tier 1 (CET1) trigger for the bond is 5.125%. SocGen currently runs a fully loaded CET1 ratio of 10.5%, the buffer to a principal write down is - €20bn. • Coupon deferral: The coupons may get deferred if the CET1 ratio falls below 8% (this rule starts to phase in from Jan 01, 2016 and is only fully applicable in 2019). The buffer to this requirement is a very healthy —11bn • Notes: Buying one of the highest yielding/ lowest $ NC5 AT1; Buffers to any triggers are very healthy and higher than the averages in the sector; SocGen has filled its AT1 requirements, so the probability of a new issue re- pricing this bond is "low"; French banks have traditionally been the most investor friendly of all Euro Zone banks (i.e. still call all institutional deals on first call date) SEB 5.75 2049 (Offer Px - 99.26, YTC - —6.0%) • The bond is a non call 5y (NC5) structure with first call date on 05/13/2020, after which it floats to USSWS + 3.850%. Post first call date, it is callable very six months. • Using the forward curve, the yield to perpetuity is —6.4% (assuming it is not called) • Principal Trigger: The CET1 trigger for the bond is 8.0%. SEB currently runs a fully loaded CET1 ratio of 17.8%, the buffer to a principal write down of - 10% is one of the highest among all AT1 issuers • Coupon deferral: The coupons may get deferred if the CET1 ratio falls below - 10.5% (this rule starts to phase in from Jan 01, 2016 and is only fully applicable in 2019). The buffer to this requirement is also one of the highest given the very high CETI ratio. • Notes: SEB is one of the most profitable and well capitalized banks in the world; Business mix ensures that it is 3) less exposed to the Swedish property market vs. the peer group; Another issuer where the need for further AT1 is very limited, so new issue is less likely and the bond should have a strong regional bid (35% of the issue was placed with Nordic asset managers); this the desk's best pick among the high quality IG rated ATis Lastly, please find a run of bank $1000 bank preferreds. Pricing is indicative as of today, 11/18/2015. Nxt Call B Px A Px B YTC B CUR Floats Notes AXP 5.20 11/15/19 9874-99% 5.518 5.259 + 342.8 S 2MM AXP 4.90 03/15/20 96-96% 5.964 5.104 + 328.5 S 5MM BAC 5.20 06/01/23 93%-941/4 6.254 5.547 +313.5 S 2MM BAC 5.125 06/17/19 96%8-97% 6.193 5.304 +338.7 S 5MM BAC 6.25 09/05/24 100%-101% 6.118 6.196 +370.5 BAC 6.50 10/23/24 104%-105% 5.809 6.205 +417.4 BAC 8.00 01/30/18 103'A-104 6.376 7.748 + 363 BAC 8.125 05/15/18 103%-104'A 6.462 7.831 + 364 S 2MM BAC 6.10 03/17/25 100'A-100% 6.063 6.085 +3.898 BK 4.95 06/20/20 98%-99'A 5.259 5.013 + 342 S 3MM BK 4.50 06/20/23 92/2-93'A 5.693 4.865 + 246 Q C 6.30 05/15/24 97/2-98 6.691 6.462 + 342 Nxt Call B Px A Px B YTC B CUR Floats Notes EFTA00840386 C 6.125 11/15/20 100%-100% 6.036 6.102 + 447.8 MKt 3MM C 5.95 N 08/15/20 98%-99% 6.288 6.033 + 409.5 C 5.95 01/30/23 97%-98% 6.365 6.095 + 407 C 5.95 05/15/25 95%-9534 6.651 6.255 + 390.5 Mkt 3x2 C 5.90 02/15/23 97%-98% 6.312 6.044 + 423 C 5.875 03/27/20 9834-9834 6.373 5.987 + 405.9 Mkt 3MM C 5.80 11/15/19 98-98% 6.377 5.918 + 409.3 C 5.35 05/15/23 9334-9434 6.459 5.722 + 347 COF 5.55 06/01/20 9934-100% 5.613 5.564 + 380 FITB 4.90 09/30/19 9334-94% 6.767 5.227 +313 Q FITB 5.10 06/30/23 90%-91% 6.670 5.620 + 303 GS 0 12/21/15 7134-72% 611.530 5.585 + 76.75 Nxt Call B Px A Px B YFC B CUR Floats Notes GS 5.375 05/10/20 9934-99% 5.566 5.416 + 392 GS 5.70 05/10/19 10034-101 5.619 5.686 + 388 WPM 7.90 04/30/18 102%40334 6.600 7.679 + 347 S 3MM WPM 6.75 02/01/24 107%408% 5.557 6.265 + 378 WPM 5.00 07/01/19 9654-97% 6.054 5.175 + 332 WPM 6.10 10/01/24 10034-101% 5.988 6.055 + 333 WPM 6.125 04/30/24 100%401% 6.010 6.079 + 333 WPM 5.15 05/01/23 9534-96 5.949 5.407 + 325 WPM 6.00 08/01/23 10034-101% 5.916 5.970 + 330 WPM 5.30 05/01/20 9934-100 5.427 5.327 + 380 MS 5.55 07/15/20 99%-99% 5.703 5.585 + 381 S 2MM MS 5.45 07/15/19 97%-98% 6.304 5.604 + 361 S 3MM Nxt Call B Px A Px B ?it B CUR Floats Notes PNC 4.85 06/01/23 94-95 5.847 5.160 + 304 Q PNC 6.75 08/01/21 108-109 5.110 6.250 + 368 STI 5.625 12/15/19 10034-100% 5.589 5.618 + 386 STT 5.25 09/15/20 100%400% 5.218 5.243 + 359.7 WFC 5.875 06/15/25 105-105% 5.204 5.595 +399 WFC 7.98 03/15/18 106406% 5.186 7.528 + 377 WFC 0.00 12/21/15 97%-97% 41.965 5.727 + 93 WFC 5.90 06/15/24 101)4-101% 5.713 5.827 + 311 Sources: Bloomberg Finance U'; 9l5 Cocos: a primer; Deutsche Bank Flow Credit Trading From: Jeffrey E. [mantic): jevwMaior n Sent Tuesday, November 17, 2015 12:43 PM To: Paul Morris Subject: lets look at leveraged preferred or leveraged bonds. please note The information contained in this communication is confidential, may be attorney-client privileged, may constitute inside information, and is intended only for the use of the addressee. It is the property of EFTA00840387 JEE Unauthorized use, disclosure or copying of this communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by return e-mail or by e-mail to [email protected], and destroy this communication and all copies thereof, including all attachments. copyright -all rights reserved This communication may contain confidential and/or privileged information. If you are not the intended recipient (or have received this communication in error) please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidden. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. EFTA00840388