EFTA00606030

, For Key Client Partners or US InstitillIonil Inve Deutsche Bank Global Markets Opportunities in the US Municipal Market • January 2017 tA, Municipal Capital Markets Desk Contacts: Svetlana Segal, Director, Michael Kowal, Vice President, Structured Solutions Desk Contacts: Ron Vandenhandel, Director, Adrienne Coyle, Vice President, Deutsche Bank Securities Inc., a subsidiary of Deutsche Bank AG, conducts investment banking and securities activities in the United States. EFTA00606030 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Deutsche Bank Global Markets a Muni Capital Markets: Group Overview 2 EFTA00606031 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Deutsche Bank Municipal Capital Markets Group The Most Efficient and Focused Muni business in U.S. Municipals • Focus on providing customized client solutions and creating partnerships Client-Focused • Deep relationships help generate unique and programmatic opportunities • Significant amount of repeat business • Fourth largest Muni business on the street Efficient • 20 full-time employees vs. -150 street average • No low margin businesses • Not confined to any geographic area or credit sector Adaptive • Adaptive team with structuring, legal, and credit expertise • Experience with non-traditional assets and structures • One fully-integrated platform, deeply integrated into DB's global footprint Effective • Streamlined execution process • Most execution decisions taken at desk level • Business resources have steadily grown over 5 years Substantial • Significant capacity available for large transactions: Investor Financing, Capacity Direct Lending, Securities Trading Deutsche Bank 3 EFTA00606032 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Deutsche Bank Municipal Capital Markets Group One Integrated Platform • a • a U' a w 1 Borrowers Banks and Broker Dealers im 01,a Financial Advisors Investors Developers t r DB Internal Teams Municipal Capital Markets \• Cash Sales Banks and Tender Investor Investor International Broker Option Total Structured Clients Dealers Bond Return Financing Program Swaps 4 EFTA00606033 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Deutsche Bank Municipal Capital Markets Group Four Client Businesses Tax-Exempt and Affordable Cash and Derivatives Issuer Financing Investor Financing Housing Trading Direct financing to Wide variety of financing Financing and leverage for Cash Trading in tax-exempt municipal and non-profit solutions within the tax- investors in tax-exempt and taxable bonds; client clients on a tax-exempt exempt and affordable assets across a variety of derivatives and structured basis across a variety of housing market products notes products Direct Lending: Financing Municipal Bonds: - Synthetic floating rate via TRS - Multi-billion USD financing book - Fixed rate: trading book, buy/hold • Total Return Swaps - Originate for investor partners • Structured Financing • Package w/ financing • Tender Option Bond • Custom, bespoke solutions Relationships: - Borrowers. financial advisors, Relationships: developers, brokers, etc. - Asset managers, hedge funds, family offices, alternative investors, etc Deutsche Bank 5 EFTA00606034 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Deutsche Bank Global Markets a Muni Capital Markets: Relative Value Overview EFTA00606035 US Municipals Are an Appealing and Unique Asset Class Historical Outperformance in Rising Rate Environment Taxable vs. Tax-exempt Yields Higher Rates Cause Spread Wideningo) • Historically, as rates increase, the value of the tax-exemption to investors increases, bringing more buyers into the tax-exempt 2.0% market 30y UST - MMD Spread 1.5% This increased demand for tax-exempt bonds as rates rise tends to 1.0% drive spreads between taxable and tax-exempt rates higher as rates increase 0.5% This means that municipal bonds often outperform other taxable 0.0% fixed income investments in a sell-off: -0.5% • Regression on positive monthly change in 30y UST rates since -1.0% 60* 1995 shows that 30yr MMD historically tends to move at about 0 -1.5% 67.5% of 30yr UST yield movements 0 * -2.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 30y UST Yields Positive MoM Change in 30y UST vs. MMD(2) Historical Statistics using UST Sell-off Months(2) Regression: AMMD = 67.5% • RUST Months of UST Sell-off Used 108 0.8% Total Months 260 MoM change in 30y MMD 0.6% 1:1 movement 30v UST 0 O Average 0.184% 0.4% Standard Deviation 0.124% 0 95% Highest 0.373% Historical 0.2% Regression 5% Lowest 0.017% 0.0% 30v MMD 0 0.2% 0.4% 0.6% Average 0.109% -0.2% O Standard Deviation 0.144% 95% Highest 0.390% -0.4% O MoM change In 30y UST 5% Lowest -0.047% Deutsche Bank (I) MMD data from Tia3, UST data from Bloomberg; chart uses data from 1/3/1995 to 8/30/2016; past performance, simulated or actual, Is not a reliable indicator of 7 future results (2) Date uses only positive month to month movements in 30y (1ST yields calculated on the first business day of each month from 1/3/1995 to 8/30/2016: does not include crisis data from 6/1/2008 to 6/1/2009 Confidential EFTA00606036 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Attractive Characteristics of the US Muni Market • $4 trillion notional outstanding USD-denominated • Diffuse (>50,000 issuers, 2mm CUSIPS) Fixed Income • High grade market (lower default and LGD than corporates) • Majority of the new issue volume is >10 yr Long Duration • -70% of trading activity in bonds >10 yr(1) • Muni 5y30y avg. spread at 1.71% vs. UST 5y30y avg. spread at 1.18%(2) Historically Steep • Current 20yr AAA MMD ; 20yr UST at 106.1%(3) Yield Curve • Absolute yields are comparable to taxable alternatives • Low correlation with respect to US treasury, IG and HY corporate bonds so Low Correlation client can diversity their asset portfolios by holding a portion of munis with Other Fl • Potential for outperformance relative to other assets* • Low rates have caused spreads between TX and TE bonds to compress Outperform in Bear • Rising rates are expected to cause spread widening => muni outperformance Rates Environment • Historically, munis have outperformed in months of rate sell-offs' Deutsche Bank For illustrative purposes only. terms and conditions subject to change. AN transactions subject to final credit, legal fax. and other internal DB approvals. DB is not a financial accounting. or tax advisor to Investor and Investor should consider carefully with their advisors pilot to executing any transaction. 8 (1) Electronic Municipal Market Access 20t5 trading data (2) Historical data from 1995: (3) Bloomberg data from 9.23,020,6: UST Yield using CMTUSD20 Index • Past performance. simulated or actual. is not a reliable indicator of future results EFTA00606037 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Deutsche Bank Global Markets a Muni Capital Markets: Leveraging Municipals Bonds 9 EFTA00606038 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Term NB Financing Trade Structure and Cash Flows Tax-exempt Bond 1. Closing Mechanics 6% on 100mm - DB I Investor wire $$ to Trust Notional - Trust purchases Bond - Trust Issues $6mm Trust buys Coupon 2 100mm Bond • A Cert to DB • B Cert to Investor 2. Ongoing Cashflows - Trust receives $6mm (tax-exempt 6%) $2.275mm $ 3.725 Coupon Investor DB Coupon - Trust pays DB $2.275 mm (tax-exempt 3.5%) Puts in Puts in - Trust pays Investor $3.725mm (tax-exempt 2 $35 MM $65MM 2 10.64%) MTM margin may be required MTM posting (Recourse) KCP Investor Interest Rate Swap 3. Transaction Unwind Events (not respired) r4 .4 - A / B Certificates mature (1-5y) - Inv exercises Optional Unwind B Certificate A Certificate - Muni Bond defaults or becomes taxable - Muni Bond price falls by a predefined amount 35MM Notional 65MM Notional @10.64% @ 3.5% Termination Mechanics: i. Bond sold at market to Investor / DB Street Unwind Payoff Scenarios•• ii. DB receives $65mm' Bond Price at Unwind 120 100 80 60 iii. Investor receives residual $$ DB receives 65• 65 65 65 Investor receives (pays) 55• 35 15 -5 Deutsche Bank • Adjusted for any gainshare (as required by tax counsel) 10 • Scenarios provided are for illustrative purposes only and do not contain all potential outcomes. DB can provide additional information upon request Structure and terms of the transaction are provided for iNustrauve purposes only and are subject to change based on anal DB approvals EFTA00606039 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Indicative A/B Returns for Selected Muni Bonds Recourse Financing under ISDA framework I AB Tenor (y) 1 Bond Information Class A Rate 3.50% Muni Moody's Maturity Call Bond yield• Bond Price A Notional Class B Indicative Return Alabama Gas District NR A3 9/1/2046 N/A 4.23% 112.929% 77.50% 6.75% Loma Linda Uni Med Center BB NR 12/1/2056 6/1/2026 4.71% 104.045% 75.00% 8.35% Klein School District AAA Aaa 8/1/2046 8/1/2026 3.71% 102.309% 80.00% 4.55% Chicago O'Hare Intl Arpt A NR 1/1/2047 1/1/2027 3.83% 109.600% 77.50% 4.98% Chicago Transit Auth A. NR 12/1/2046 12/1/2026 4.17% 106.651% 77.50% 6.49% Chicago GO BBB. NR 1/1/2038 1/1/2027 6.04% 99.524% 75.00% 13.66% - All returns assume that rates are unchanged - Class A Rate quoted as of 1/20/2017 and is calculated as a spread to LIBOR swaps Deutsche Bank Tilting based on data from 1/20.2017 All transactions subject to final credit. legal. fax. and other internal DB approvals. D8 is MN a financial. accounting. or lax advisor to Investor and Investor should consider carefully 11 mil their advisors prio✓ to executing any transaction. EFTA00606040 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Term NB Financing Overview of Risks and Considerations Muni Bond Price Risks At Financing Structure Risks Risk Ex • lanation Consideration Risk Ex r lanation Consideration Risk-Free Rates Broad. risk-free rates Possible to partially / fully hedge Bond Price Risk Proceeds of bond sales Investor should carefully (LIBOR) such as LIBOR increase LIBOR to offset rate risk are distributed first to DB evaluate Bond Price Risks then to client mentioned here and only execute when comfortable with the risk / return tradeoff Muni Market Muni market spreads. Investor must be comfortable Tenor Mismatch Financing tenor is shorter Upon Trust Termination, any Spreads measured as the that MMD cannot be directly Risk than underlying bond market losses of underlying difference between MMD hedged through interest rate maturity bond are first applied to B and LIBOR. may increase swaps Certificate Idiosyncratic Specific credit quality of Muni Bonds have historically Credit Spread the issuer deteriorates. experienced a very low default Trigger Price DB has right to terminate Investor should be aware that increasing the single- rate: Investors can select names Risk transaction either if Muni if either event occurs. DB will name spread across ratings and sectors that Bond price drops below have the optional right to fits specific risk / return appetite unwind trigger immediately collapse the Trust Liquidity Specific bonds may Investors must be comfortable Spread Risk contain nonstandard or with the inherent higher risks Early Trust may unwind early Investor must be comfortable complex features. leading associated with less liquid Termination Risk due to events outside of with early unwind events. to a wider single-name bonds, as perceived by the Investor's control including but not limited to spread. especially in general market that determines price decline past trigger. times of market stress the price over time bond failure to pay. bankruptcy of bond obligor. Optionallty / Callable Muni Bonds are Investors must be comfortable and taxability Callability generally called when that the duration of callable Collateral Risk Client may have the ability Investor must maintain economically bonds can change quickly. to post collateral to avoid sufficient liquidity to post it advantageous to the depending on the markets view an price-based unwind Investor elects to remain in issuer. not the investor of the likelihood of being called. trigger. subject to DB the trade without having to taking into account the costs of credit approval terminate / lock-in any losses issuing refinancing bonds Taxability Risk The Trust collapses upon Most Muni Bonds carry a tax- taxability of the Muni exempt opinion from bond Bonds counsel Deutsche Bank 12 Al transactions subject to final credit. legal. fax. and other internal DB approvals. DB is not a financial. accounting. or tax advisor to Investor and Investor should consider carefully with their advisors prior to executing any transaction Further intonation can be provided upon request. EFTA00606041 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Deutsche Bank Global Markets 0 Muni Capital Markets: Short Term Tax Exempt Muni Opportunities 13 EFTA00606042 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Short Term Tax Exempt Investment Sample Portfolio Characteristics Key Characteristics •Senior TOB Certificate program was created to provide Portfolio Statistics municipal mutual funds and banks with a financing vehicle in the form of a partnership, which also helps preserves the tax exemption for both counterparties Average Credit Quality AA-A Rating •The basic structure was developed to meet the eligibility requirements of tax exempt money market funds Maturity 5 business days •Senior Certificates have a 5 business day put to Market Price 100 par Deutsche Bank Average Coupon 0.90% •Overcollateralization provides additional security— Average Overcollateralization 30% Sample Cusips Floater „ Cusip Obligor State Rating OC Rates • 88033L3D9 NYC Water NY Aa1/AA+/AA. 0.79% 137% 88033LV48 Community Health Network IN A2/AMR 0.87% 141% 88033L7Y9 MedStar Health MD AVA-/A 0.93% 142% 88033SY57 Lee Memorial Hospital FL A2/A/NR 0.91% 154% 88033LZ69 Regional Transportation District CO Aa3/A/AA- 0.86% 144% Deutsche Bank 'Rates as of l/18r2017 14 Min overcollateralization levels may vary on the deal by deal basis For illustrative purposes only. terms and conditions subject to change. All transactions subject to final crocit legal, tax. and other internal DB approvals. DB is not a financial. accounting. or tax advisor to Investor and Investor should consider carefully with their advisors prior to executing any transaction EFTA00606043 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Sample Portfolio Examples of select TOB Senior Certificate Cusips Current Series Amount '000 Floater Cusip Name Bond Cusip Bond Ratings State Short Term Ratings OC' Rate* 1087 14765 25155DNF4 Public Housing Capital Fund Revenue 74442YAB2 NR/AA-/NR OT 1.23% AA-/A-2 137% XF1046 32490 88033MFB8 Metropolitan Pier & Exposition Authority 592248BH0 Baa3/BBBIBBB IL 1.05% A1/VMIG2 & 136% 1184 13330 25155D261 State of Illinois 452152525 Baa2/BBB/BBB+ IL 0.98% Al/VMIG2 &NR/NR 155% XF1017 30000 8803317E3 Catholic Health Initiatives 93978HMK8 A3/P-2/A-/NR WA 0.96% A1/VMIG2 &AA-/A-2 133% XG0093 9505 880335Q31 IL State Housing 452028BN5 NR/AA+/NR IL 0.96% AA+/A.2 133% XF1054 25655 88033M524 Vanderbilt University Medical Center 592041WH6 A3/NR/NR TN 0.89% Al/VMIG2 & 147% XF1056 8715 880335223 Orlando Health Obligated Group 68450LCH6 A2/A/A FL 0.86% Aa3/VMIG2 & 143% XF1047 8250 88033MFG7 Children's Hospital Obligated Group/DC 254764KC6 A1/NR/A+ DC 0.86% Aa2/VMIG2 & 148% 1182 8250 25155DY47 Dallas/Fort Worth International Airport 235036E71 A1/A+/A TX 0.84% Aa2/VMIG2 &NR/NR 144% XG0069 3750 88033SUG7 University of Dayton 67756A8B1 A2/A+/NR OH 0.84% AA-/A-2 147% XF1057 22235 8803352A1 New Jersey Turnpike Authority 6461393R4 A2/A+/A NJ 0.83% AA-/A-2 147% XF1033 9840 88033L4B2 San Francisco International Airport 79766DFC8 Al/A+/A+ CA 0.83% Aa2/VMIG2 & 146% XG0061 5250 88033SSX3 University of California 91412GRZ0 Aa2/AA/AA CA 0.82% & AA/F1 152% XF1000 9360 88033LR76 Baptist Health South Florida Inc 838810BY4 Aa3/AAINR FL 0.81% Aa3NMIG2 &AA-/A-2 127% XF1035 5760 88033L613 Buck Institute for Research on Aging 13080SET7 NR/AA/NR CA 0.81% AA/A-2 141% XF1037 5250 88033L6Q7 State of California 13063CPU8 Aa3/AA-/AA- CA 0.81% Aa1/VMIG2 & 153% Deutsche Bank Rates as of 1/19/2017 15 Min overcollateralization levels may vary on the deal by deaf basis For illustrative purposes only, terms and conditions subject to change. All transactions subject to final credit. legal. fax. and other internal DB approvals. DB is not a financial. accounting, or tax advisor to Investor and Investor should consider carefully with their advisors prior to executing any transaction EFTA00606044 For Key Client Partners or US Institutional Investors. Not for Retail Distribution TOB Senior Certificates Overview of Risks and Considerations TOB Senior Certificate Risks Muni Bond Price Risks Risk Ex •lanation Consideration Risk Ex •lanation Consideration Trigger Price Risk If the bond price Investor should evaluate Interest Rate Broad. risk-free rates Possible to partially / fully hedge decreases below required Bond Price Risks mentioned Risk increase to offset rate risk OC levels, the residual here and be aware that investor may de-lever or transaction can unwind early unwind the trust Muni Market Muni market spreads. Investor must be comfortable DB Credit Risk TOB Senior Certificates DB is currently rated Spreads measured as the that MMD cannot be directly investors take Baa2/BBB+/A-; Investor has difference between MMD hedged through interest rate collateralized credit 5 business day put option and LIBOR. may increase swaps exposure to the underlying and can exit the transaction in muni bond backed by a advance of a credit event put to Deutsche Bank Idiosyncratic Specific credit quality of Muni Bonds have historically Credit Spread the issuer deteriorates, experienced a very low default Tender Option TOTE events include Upon occurrence of any of increasing the single- rate: Investors can select names Termination Taxability/Bankruptcy/Cred these events, TOB Senior name spread across ratings and sectors that Events (TOTE) it downgrade below Certificate holders lose their fits specific risk / return appetite Risk' investment grade/Failure right to tender and instead the to pay bonds are sold . The proceeds are used to pay the TOB Liquidity Specific bonds may Investors must be comfortable Senior Certificate Holders, if Spread Risk contain nonstandard or with the inherent higher risks not sufficient, they receive the complex features, leading associated with less liquid underlying bonds in kind to a wider single-name bonds, as perceived by the spread, especially in general market that determines times of market stress the price over time TOB Senior Investor receives floating Can be addressed by Certificate Rate rate that resets periodically modifying the tenor of the Optionallty / Callable Muni Bonds are Investors must be comfortable Risk based on the benchmark TOB Senior Certificate Callability generally called when that the duration of callable rate and remarketing economically bonds can change quickly, spread set by the advantageous to the depending on the markers view remarketing agent. The issuer. not the investor of the likelihood of being called, spread and the benchmark taking into account the costs of rate can reset lower/ issuing refinancing bonds higher based on the current market environment Deutsche Bank *For full list of Unwind events please refer to Master Terms of Trust Agreement and Series Documents, DB can be provide additional Information upon request All transactions subject to final credit. legal, tax, and other internal DB approvals. DB is not a financial, accounting, or tax advisor to Investor and Investor should 16 consider carefully with their advisors prior to executing any transaction. Further information can be provided upon request. EFTA00606045 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Deutsche Bank Global Markets a Muni Capital Markets: Direct Lending EFTA00606046 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Direct Lending Overview Financing and Syndication Partnership Overview of DB Direct Lending Program - DB has a robust direct lending book that provides sources of financing to municipal borrowers as an alternative to utilizing the public market - Our direct lending program provides customization and flexibility with regard to structure. amortization, tenor and speed of execution - Sectors where DB has been active in providing financing solutions include Non-Profit Heath Care. Affordable Housing. Colleges & University. Master Planned Real Estate Communities and Tax Equity (Solar & Wind) - Opportunities: the direct lending program provides investors with the ability to partner with DB via loan syndication or through the purchase of directly placed muni bonds Current Opportunity: Stonehaven Student Housing Debt Overview Deal Structure 20mm Non Rated Tax Exempt Bond - 524 bed student housing facility adjacent to University of California - 2032 Final Maturity Riverside - 4.305% Fixed Coupon (Federal and State Tax Exempt) Ground lease from UC Riverside to 501c3 operator No optional call feature • Leasehold interest in the facility Fund. Debt Service Fund. Debt Service Reserve Fund • Permanent tax abatement - • Building reverts to university at end of lease - Turbo Feature: first 30% excess revenue curtails the bond - DB Re-Offers 11mm Custodial Receipt Key Credit Metrics - Average Life: 4.77 years - 96% occupancy - Final Maturity: 7/1/2026 - 70% LTV - Price: 103.45 - 1.13x DSCR - Yield: 3.50% - Debt per unit=101k 'Could also offer as a Senior Certificate with or without a DB liquidity facility Deutsche Balt: EFTA00606047 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Direct Lending Overview of Risks and Considerations Direct Lending Risks Muni Bond Price Risks Risk Ex .lanation Consideration Risk Ex .lanation Consideration Credit Default If credit quality of the Investor should carefully Interest Rate Broad. risk-free rates Possible to partially / fully hedge Risk specific borrower evaluate covenants and Risk increase to offset rate risk deteriorates, then the underlying credit risk of the borrower may default on borrower direct lending transaction Muni Market Muni market spreads. Investor must be comfortable Ongoing Direct lending transactions Investor should be Spreads measured as the that MMD cannot be directly Disclosures / usually carry a yield comfortable with the difference between MMD hedged through interest rate Documentation premium due to non- underlying documentation. and LIBOR. may increase swaps Rating standard features (e.g. disclosure requirements. and unrated. no official structure of the direct lending statement, old unt etc.) transaction Idiosyncratic Specific credit quality of Muni Bonds have historically Credit Spread the issuer deteriorates. experienced a very low default increasing the single- rate: Investors can select names Transfer DErs direct lending book is Transfer restrictions and name spread across ratings and sectors that Restrictions not constructed for retail structure may reduce the fits specific risk / return appetite Liquidity Risk distribution. and are liquidity of the bond, which restricted on resale to may affect pricing upon resale Qualified Institutional Liquidity Specific bonds may Investors must be comfortable Buyers Spread Risk contain nonstandard or with the inherent higher risks complex features, leading associated with less liquid Tax Risk The direct lending A significant change in tax to a wider single-name bonds. as perceived by the transactions that DB policy could affect the after- spread. especially in general market that determines originates are tax-exempt tax return and price of a tax- times of market stress the price over time and may be affected by exempt bond changes in federal tax Optionality 1 Callable Muni Bonds are Investors must be comfortable policy Callability generally called when that the duration of callable economically bonds can change quickly. advantageous to the depending on the markers view issuer. not the investor of the likelihood of being called. taking into account the costs of issuing refinancing bonds Deutsche Bank 19 3anking & Securities EFTA00606048 For Key Client Partners or US Institutional Investors. Not for Retail Distribution Disclaimer I This document is intended for discussion purposes only and does not create any legally binding obligations on the part of Deutsche Bank AG and/or its affiliates (TB"). Without limitation, this document does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction. When making an investment decision, you should rely solely on any specific final documentation relating to a transaction and not the summary contained herein. DB is not acting as your legal, financial, tax or accounting adviser or in any other fiduciary capacity with respect to any proposed transaction mentioned herein. This document does not constitute the provision of investment advice and is not intended to do so, but is only intended to be general information. My product(s) or proposed transaction(s) mentioned herein may not be appropriate for all investors and before entering into any transaction you should take steps to ensure that you fully understand the transaction and have made an independent assessment of the appropriateness of the transaction in the light of your own objectives, needs and circumstances, including the possible risks and benefits of entering into such transaction. For general information regarding the nature and risks of the proposed transaction and types of financial instruments please go to risk disclosures. You should also consider seeking advice from your own advisers in making any assessment on the basis of this document. If you decide to enter into a transaction with DB, you do so in reliance on your own judgment. The information contained in this document is based on material we believe to be reliable; however, we do not represent that it is accurate, current, complete. or error free. 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