EFTA Document EFTA01469046

Subject: Fw: KCP Capital Markets Trade Idea: Enel and Telefonica hybrids that offer 5.5% yield to call to play the carry and periphery theme post ECB [C] From: Tazia Smith ‹ > Date: Tue, 10 Jun 2014 13:05:24 -0400 To: Rich Kahn a, II > " Cc: Paul Morris , Vahe Stepanian Classification: Confidential Hi Rich - An iteration here of the 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 binary 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 New York, NY 10154 Tel: Mobile: Fax: E-mail: From: Vanshree Verma Sent: 06/10/2014 05:45 PM CET To: Vinit Sahni Subject: KCP Capital Markets Trade Idea: Enel and Telefonica hybrids that offer 5.5% yield to call to play the carry and periphery theme post ECB [I] Classification: For internal use only Intended for Non-Advisory Clients EFTA01469046 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 European Corporate Hybrids Index OAS, bp Vanshree Verma Deutsche Bank AG, Filiale London Global Client Group 105/108 Old Broad St (Pinners Hall), EC2N lEN London, United Kingdom Tel. Mobile Email Any proposed ideas are being delivered to you by the DeAWM Key Client Partners ("KCP") London desk for discussion purposes only, and do not create any legally binding obligation on the part of Deutsche Bank AG and / or its affiliates ("DB"). These ideas are for the consideration of the intended recipients of this mail only. The KCP London desk does not provide investment advice. All intended recipients are Professional investors (as defined by MiFID), who understand the strategy, characteristics and risks EFTA01469047 associated with any ideas proposed herein and will be able to evaluate it independently. All trades on proposed ideas shall be subject to the relevant internal approvals prior to execution. This e-mail may contain confidential and/or privileged information. If you are not the intended recipient (or have received this e-mail in error) please notify the sender immediately and delete this e-mail. Any unauthorized copying, disclosure or distribution of the material in this e- mail is strictly forbidden. Please refer to http://www.db.com/en/content/eu_disclosures.htm for additional corporate and regulatory EU disclosures and to http://www.db.com/- unitedkingdom/content/privacy.htm for information about privacy. EFTA01469048