EFTA Document EFTA01454402

From: Tazia Smith Sent: 6/10/2014 1:05:24 PM To: Rich Kahn CC: Paul Morris Vahe Stepanian Subject: KCP Capita Mar sets Tra e I ea: Enel and Telefo . yield to call to play the carry and periphery theme post EC8 IC) Classification: Confidential Hi Rich - An iteration here of tlx: tighter-periphery spreads here. I know you and I have discussed yield/bond solutions for getting cash to work with a much different payout profile thank binaty trades. Let me know your thoughts and/or please highlight to Jeffrey as you identify value/a fit. All My Best. Tazia Tazia Smith Director Key Client Partners - US Deutsche Bank Securities. Inc. Deutsche Asset & Wealth Management 345 Park Avenue - 26th Floor York. NY 10154 From: Vanshree Verna Sent: 06/10/2014 05:45 PM CET To: Vinit Sahni Subject: KCP Capital Markets Trade Idea: End and Telefonica hybrids that offer 5.5% yield to call to play the carry and periphery theme post ECB HI Classification: For internal use only Intended for Non-Advisory Clients • Corporate hybrids are high yielding, perpetual securities, lower in the capital structure and therefore offer a significant pickup vs senior paper • Hybrids issued by peripheral issuers such as Enel and Telefonica offer a way of playing carry and periphery, both themes I like post ECB • Rating agencies treat these securities as 50% debt and 50% equity until the call date, after which they are treated as 100% debt. So issuers have a strong incentive to call these, and they are priced as such • Key risk with these securities is that these can be called by the issuer at a price of 101 if their senior bonds are downgraded to high yield - This is a 2 notch downgrade from current ratings ( their senior bonds are rated Baa2 and both companies are on negative outlook) • I particularly like Enel 6.5% and Telefonica 6.75% bonds as the risk of the ratings related 101 call being triggered is minimised due to the lower price and higher coupon vs others.These yield around 5.5% to their call dates in Jan-2019 and Nov-2020 • Both these issuers have reported solid fundamentals - Telefonica highlighted a continued improvement in Spain and solid performance in Brazil. Enel is continuing deleveraging and also benefits from a €4.4bn disposal programme CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0 112480 CONFIDENTIAL SDNY_GM_00258664 EFTA01454402