EFTA Document EFTA01433416

Subject: [ / ] DB: ARS Lebac DB Pass-through Note From: Xavier Avila Date: Tue, 24 Oct 2017 To: "Paul Barrett Cc: Stewart Oldfield Martin Zeman Joshua Shosha 15:58:07 -0400 Paul, find below the details of the Lebacs ARS denominated offshore structure we discussed briefly the other day. We are currently in the process of bookbulidng the below note, although is still not completely guaranteed we will issue it as we are finalizing internal approvals and total size we raise. We also attach a proposal for hedging it in an asymmetric what that will give you equivalent USD yields although not fully hedged. Finally, a paragraph on the Argentina situation after the elections of last weekend and a report DB Research published last week on the Argentinean overall political situation and assets. Let's discuss when you have a second. Thanks Xavier ********************************************** Argentina: Position for further upside The results of Argentina's mid-term elections confirm a very favorable scenario for President Macri's governing coalition in coming months and possibly years. "Cambiemos" had a stronger-than-expected national performance, having won 13 provinces, including the five largest electoral districts (or about two-thirds of the population), securing its place as the first minority party in Congress and obtaining veto power against initiatives of the opposition. In the critical Senate race of Province of BA, Bullrich's lead over former president Cristina Fernandez de Kirchner was larger than expected. Moreover, as most opposition leaders lost and other competitors also emerged weaker the bar is even lower for the incumbents to pass legislation. This means a strong boost for Macri's reform agenda and his bid for the 2019 presidential race. Asset prices rallied on Monday following these results, but at a measured pace, suggesting market participants have largely positioned for the positive outcome. Also — as we have highlighted in recent research — the more subdued response is expected at this stage of the cycle and the policy mix favored by this administration EFTA01433416 (with a slow fiscal and disinflation path). This requires strong USD issuance and tight monetary policy for longer, which limit the room for more rapid reprising. See our recent report for a review of recent macro developments and outlook in Argentina, and discussion on how to position for this stage in the cycle. That said, this path was chosen to consolidate political power before moving on to the more challenging parts of fixing Argentina's macro framework. The success of the strategy should anchor the disinflation and adjustment paths and thus reduce the risk (for given yields). Accordingly, while valuation in credit may already look tight vs. its current credit standing, there is still scope for further tightening due to a). Potential multiple-notch credit ascension if reform agenda stay on track; b). The flattening of spread / quality curve in EM credit markets under the constructive external backdrop with continued inflows; and c). Alternative opportunities (with spread pickup) offered by EUR bonds, select local law USD bonds, select provincial bonds, and GDP Warrants. USDARS Spot Ref 17.50 DB AG Lebacs Pass-through ARS Note, Cash Setttled in USD Note Issuer DB AG London Reg S Issue Date [ ] Nov 2017 Aggregate ARS Notional USD equivalent of ARS [TBD]mio Minimum ARS Denominations USD equivalent of ARS [90]mio minimum (Around USD 5mio) Maturity [ 21 ] June 2018 Yield ARS in USD Reference Issuer Republic Type of Security ("LEBAC") with Maturity [ ] June 2018 [ 24.00 ]% (Act/365) Cash Settled Central Bank of the Argentine Letras del Banco Central USDARS Non-Deliverable Capped FX Forward, Cash Settled in USD EFTA01433417 Documentation OTC Transaction under ISDA/CSA Notional ARS Notional as per DB AG Lebacs Pass-through ARS Note Maturity [ 21 ] June 2018 USDARS Strike [ 19.65 ] [ 19.25 ] USDARS Cap [ 20.00 ] [ 21.00 ] Annualized Return 4.60% 7.52% *This is the USD Annualized Return that client would get in its USD Investment assuming there is not Lebacs default and USDARS Spot does not fixed at Maturity Date above the Cap fcid:[email protected] {cid:[email protected]} Xavier Avila Managing Director I Key Clients Partners Wealth Management Americas Deutsche Bank Securities Inc New York, NY, 10154-0004 Office Mobile Email Key Client Partners (KCP) Americas does not provide investment advice and the products, investment ideas and solutions and related matters discussed EFTA01433418 herein are provided for discussion purposes only, and strictly on a non- advisory basis. KCP products and services are intended and available only for persons who are sophisticated institutional investors within the meaning of the FINRA Rule 4512(C)(3), and who are capable of evaluating the strategies, characteristics and investment risks of, and exercising independent judgment in evaluating, the ideas and products discussed herein. Trades and transactions are subject to relevant internal approvals of DBSI or its affiliates prior to execution, and the execution of any transaction or idea discussed herein is conditional on your becoming a client of Deutsche Bank. The information set forth herein is confidential and personal to you and is being presented for your information and for discussion purposes only. Any reproduction and/or redistribution thereof (in whole or in part) or disclosure of its content without our written consent is strictly forbidden. This communication does not create any legally binding obligation on the part of DBSI or any of its affiliates. 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