Allianz hits post-crisis tight with Tier 2

Allianz achieved the lowest coupon and tightest spread on a subordinated transaction in the insurance sector since the financial crisis with a Eu1.5bn 2.241% 30 year non-call 10 Tier 2 issue on 30 March.

The insurer hit the market just before the Easter break, at the end of a quarter when the attractive levels available had led to record-breaking issuance levels but ahead of a possible drying up of liquidity in the market resulting from the public holidays.

Leads Citi, Commerzbank, Crédit Agricole CIB, Deutsche Bank and HSBC went out with initial price thoughts of the mid-swaps plus 180bp area. Allianz 5.75% 2041NC2021s were quoted at I-spread of plus 148bp, bid, and its 5.625% 2042NC22s were at plus 150bp, implying fair value of mid-swaps plus 154bp, according to Robert Chambers, FIG syndicate at Crédit Agricole CIB, while Allianz perpetual notes bid at around 200bp suggested a similar level of the low 150s taking into account a perpetuity premium of 40bp-50bp.

Guidance was refined to 165bp-170bp after two-and-a-half hours on the back of Eu3bn of orders, and the books reached a final Eu4.25bn comprising over 300 accounts by the time they were closed soon afterwards. The re-offer was set at the tight end of guidance, at 165bp over, with Chambers noting that this larger than usual move from IPTs to re-offer was possible thanks to the very granular and high quality nature of the order book. The ultimate pricing put the new issue premium at around 10bp, he added.

“When considering premiums, it is important to remember the current backdrop in which short dated senior unsecured transactions have been paying double-digit premiums and long dated corporate senior unsecured trades are paying new issue premiums of 35bp or more at the IPTs stage,” said Chambers. “As a result, the relatively minimal NIP paid by Allianz reflects their strong credit profile and also the strength of the insurance sector among the institutional investor base.”

Having closed re-offer bid on the first day of trading, the bonds widened marginally into the Easter holidays as liquidity dried up. However, Chambers noted that as liquidity returned to the market the bonds performed well to trade comfortably inside re-offer.

The UK took 31%, Germany and Austria 20%, France 19%, Asia 9%, southern Europe 6%, the Benelux 5%, Switzerland 4%, Nordics 3%, and others 3%. Funds were allocated 76%, insurance companies and pension funds 16%, and banks 8%.