WHAT THE PAYBACK PLAN MEANS

Q. How is Commerzbank arranging this?

A. It is converting €2.75bn of the ‘silent participation’ non-voting stock held by the German government into ordinary shares, and asking investors to buy €8.25bn of new shares in different forms.

Q. How will it be structured?

A. The bank will offer investors conditional mandatory convertible notes (CoMEN), a form of debt that can be converted to equity. It aims to raise €3.5bn-€4.5bn this way, with the intention to convert the notes to shares following a shareholder vote at the annual general meeting on 6 May. The notes will be priced on 13 April. It aims to raise €2.6bn-€3.4bn of this from the market – and €0.9bn-€1.1bn by converting silent participations to CoMEN, which will then be converted to shares. The second step will be a rights issue after the annual meeting to raise €6.5bn-€7.5bn, with €1.6bn-€1.9bn raised by converting silent participations and €4.9bn-€5.6bn via the market.

Commerzbank is one of the first of the large European banks to tap capital markets prior to Basel III in 2013.