CNP sells first EUR500m RT1, Vivat joins market

CNP Assurances sold the first benchmark Restricted Tier 1 in euros on 20 June, a EUR500m perpetual non-call 10 instrument that, together with a EUR300m RT1 for Vivat, showed the new insurance asset class to be gaining critical mass.


Prior to the two new issues, RT1 issuance in euros had been confined to just one transaction, a EUR300m perpetual non-call 10 for ASR Nederland launched in October 2017. SCOR RE had meanwhile sold the first benchmark-sized RT1, a $625m (EUR507m) perpetual non-call 11 in March.

“It’s nice to see the asset class develop further and to get more reference points, especially in euros as there was only ASR’s EUR300m perpetual non-call 2027,” said André Bonnal on Crédit Agricole CIB’s FIG syndicate desk.

“Now, especially thanks to CNP, we have a liquid benchmark out there that is a prime reference for other issuers to look at.”

Following initial price thoughts of the low 5% area for the perpetual non-call 10 RT1, guidance was set at 4.875% plus or minus 0.125%, will price in range, and the deal was ultimately priced with a coupon of 4.75%.

According to the French issuer, the deal — rated Baa3/BBB- by Moody’s and S&P — was more than three times oversubscribed and quickly placed with 110 institutional investors.

“This transaction is the largest euro-denominated Restricted Tier 1 subordinated notes issued by a European insurer so far,” it said. “Its success confirms the confidence of bond investors in the solidity of the CNP Assurances Group.

“This issuance will allow CNP Assurances to prepare next call dates and to optimize its capital structure,” it added, “while maintaining its financial flexibility to issue Restricted Tier 1, Tier 2 and Tier 3 subordinated notes.”

CACIB’s Bonnal put the new issue premium at around 25bp, based on where ASR’s euro RT1 was trading and the differential between RT1s and 30 non-call 10 Tier 2 structures, but also taking into account its investment grade rating versus the Dutch insurer’s sub-investment grade rating. He noted that the new issue premium was lower than those being paid elsewhere in subordinated debt, with Danske Bank, for example, paying 45bp-50bp on a $750m perpetual non-call seven AT1 the same day.

“They achieved quite an impressive pricing,” said Bonnal. “It then got caught up in the overall market underperformance, but is now trading well above par, and that’s very good news for the asset class and issuers potentially looking at this market as it ensures investors’ confidence in the product.”

Vivat, the Dutch insurer owned by China’s Anbang, had approached the market on 13 June with its perpetual non-call seven RT1, rated BB- by Fitch, seeking to raise up to EUR500m after a series of investor meetings.

It ultimately priced a EUR300m-sized deal at a coupon of 7%, in the middle of guidance of the 7% area, with the last book update citing orders in excess of EUR450m.

The 7% coupon is comfortably the highest on a RT1 yet across euros, dollars and sterling. According to Bonnal, the pricing was some 2.5% wide of compatriot ASR and the theoretical new issue premium was 80bp to as much as 100bp, although difficult to calculate given that Vivat does not have any euro Tier 2 outstanding.

“It’s quite a different animal,” he added. “At the same time, it’s the only subordinated trade that has performed lately, trading at 104.5 now, while everything else was underperforming.”

Vivat said the proceeds of the issuance will be used to optimise its financing structure, including the repayment of EUR150m of EUR400m of subordinated notes due 2041 issued by subsidiary SRLEV NV that were subject to a tender offer.

In sterling, Phoenix Group Holdings on 19 April sold a £500m RT1, linked to the acquisition of Standard Life Aberdeen’s insurance business. Following IPTs of the 6.125% area and guidance of the 5.875% area, the perpetual non-call 10 was priced at 5.75%. It was the first RT1 to be structured with a permanent write-down feature.

Meanwhile, Belgium’s P&V Assurances and Italy’s Vittoria Assicurazioni kept insurance Tier 2 ticking over on 4 July. P&V issued a EUR390m 10 year bullet at 5.5% and Vittoria a EUR250m 10 year priced at 5.75%.

“It’s quite positive to see that even if it’s the beginning of July the market is still receptive to these two small subordinated insurance trades,” said Bonnal.