The system, which was first used by Saxony-Anhalt and Hesse earlier this year to cut costs and allow more flexible issuance, has now been adopted by North Rhine-Westphalia.
The Saxony-Anhalt programme was set up by Deutsche Bank, using Hengeler Mueller for legal advice, and the Hesse programme by a consortium of Credit Suisse First Boston and BNP Paribas. For A&O, still a second-tier firm in Germany, its appointment by Schroders to the North Rhine-Westphalia work is a boost for the firm's organically-grown practice.
Although A&O is instructed by WestLB in Germany, in this instance, the deal came through Schroders to A&O in London. The deal was led out of Frankfurt by partner Johannes Bruski and senior associate Jochen Artzinger-Bolten.
The issuance programmes are likely to be replicated across many German states. According to Artzinger-Bolten, the firm is currently bidding for several similar projects.
Artzinger-Bolten said: “When considering the costs of a programme establishment, typically, after around three or four draw-downs, you tend to reach break even with a view to the costs you would have incurred on that many stand-alone debt issues. The programme allows the State to issue four different types of debt instruments on a repetitive basis, at short notice if necessary.”
The debt issuance programme will allow the German state to issue on any German exchange or in Luxembourg. There is a group of 20 permanent dealers under the programme, suggesting that the state will issue debt fairly regularly.