Patient Aegon boosts RT1 with inaugural EUR500m

Aegon attracted some EUR2.5bn of orders to an inaugural Restricted Tier 1 on 28 March, adding welcome supply to the still-thin RT1 sector, after having postponed the debut in October in less receptive market conditions.


The Dutch insurer had originally announced plans to approach the market with its first RT1 issuance on 9 October, with a perpetual non-call 10.5 euro benchmark slated to follow investor meetings. However, it put its plans on hold the following week as market conditions deteriorated.

But with credit markets in buoyant shape towards the end of the first quarter, Aegon revived its mandate and approached the market anew on the morning of 28 March.

Initial price thoughts of the 6% area were set for the EUR500m no-grow perpetual non-call five instrument, rated Baa3/BBB-/BB+. Orders passed EUR1bn in around an hour and a half, and after three hours guidance was set at the 5.75% area, plus or minus 0.125%, will price in range, with books above EUR2bn. The new issue was ultimately priced at 5.625%, with a reset spread of 521bp, on the back of over EUR2.5bn of demand, pre-reconciliation.

“It was worth the wait,” said André Bonnal, FI syndicate at Crédit Agricole CIB. “It felt like unfinished business as they did not come to the market at the end of 2018, but now they have successfully priced their debut, with the deal five times covered and performing well in the secondary market. It’s a really good development for the RT1 market.”

He noted that since being opened in October 2017 by ASR Nederland with its EUR300m trade, the euro RT1 sector has remained thin, seeing only one other liquid benchmark, in June 2018 when CNP Assurances sold the first EUR500m trade.

“Furthermore, those were printed when the market was very strong, so the RT1 market had never really performed,” added Bonnal.

However, thanks to the first quarter rally, CNP Assurances’ RT1 was trading back at par, while prevailing market levels allowed Aegon to go out with a 6% coupon as its starting point, he noted, while Aegon also offered a higher reset spread than either ASR or CNP.

“It clearly offered good value in terms of reset spread and headline coupon,” said Bonnal, “especially when we know that yields are dropping and the hunt for yield is going to continue. Plus it was investment grade-rated.”

Aegon said it intends to use the proceeds from the issuance for redemption of grandfathered RT1 securities.

“The successful inaugural issuance of these RT1 securities demonstrates our financial strength and creditworthiness,” said Matt Rider, CFO of Aegon. “This transaction provides us with financial flexibility to call part of our outstanding grandfathered securities.”