Groupama goes green in T3, Generali adds to ESG

Groupama sold its inaugural green bond on 30 June, a €500m seven year Tier 3 transaction whose sustainable nature helped the French insurer achieve tight pricing, while Generali built on its prior green issuance with a €500m 11 year Tier 2 trade issued as a debut sustainability bond.

Groupama’s mandate was announced on Monday, 28 June, with investor calls following to present the new green bond framework to investors.

The use of proceeds under Groupama’s framework include green buildings, renewable energy, energy efficiency, clean transportation, and environmentally sustainable management of living natural resources and land use. The company noted that it was founded by farmers and that sustainable development is central to Groupama’s identity as an agricultural, mutual insurance company.

“Our aim is to contribute to a growing market of green bonds and stimulate the market for sustainable investments and financing,” said Cyril Roux, Groupama deputy CEO. “This issuance illustrates our ongoing contributions to the transition to a lower carbon economy.”

After the day and a half of marketing, Groupama’s leads went out with initial price thoughts of 115bp-120bp over mid-swaps for the seven year transaction, with an expected BBB rating from Fitch. After around two hours and 20 minutes, the leads reported books above €1bn, and then after around four hours, they set guidance at 95bp+/-2bp, will price in range, on the back of over €1.4bn of demand. The spread was then fixed at 93bp on the back of around €1.2bn of orders, with the final book totalling around €850m, with more than 100 investors involved.

According to André Bonnal, FIG syndicate at joint bookrunner Crédit Agricole CIB, the pricing was 2bp through fair value for a conventional bond.

“Clearly the fact that it was green helped price comfortably inside 100bp,” he said. “From the roadshow, we knew that there was going to be a substantial amount of interest in this trade, especially as we were going with something a bit shorter than a traditional 10 year Tier 2 bullet, for example.”

Bonnal said the outcome of the transaction also reflected investors’ improving perception of Groupama over a prolonged period.

“They have come far in terms of credit quality,” he said, “and over the past few months, their Tier 2 bullet bonds have been trading very well and, if anything, outperforming their French peers,” he said. “That also came through in how much they were able to compress the premium versus where stronger and more established names are trading.”

The 93bp re-offer spread compared with seven year CNP Assurances paper in the context of 85bp, he noted.

“There was clearly quite a bit of book attrition as we tightened further,” added Bonnal, “but we closed at €850m for a €500m no-grow trade, and it is performing in the secondary market, which tells you that there is still very good interest in that bond.”

Generali extends in ESG

Generali had the previous week, on 24 June, gone beyond its previous green bond issuance by selling its first sustainability bond, a €500m 11 year Tier 2 deal. Its new framework adds to the six green use of proceeds categories of its green bond framework a further four: access to essential services/social infrastructure; affordable housing; SME financing, socioeconomic advancement and employment generation; and response to health and natural disaster crisis.

“This transaction will further extend the average maturity of our debt, consistent with our proactive approach in shaping the debt maturity profile, and will provide the opportunity for Generali to finance green and social projects,” said Generali group CFO Cristiano Borean. “Moreover, this will lead to a further reduction in the annual gross interest expense considering our outstanding debt profile.

“Sustainability is an enabler of the Generali 2021 strategy,” he added. “I am pleased by the strong reception of our first sustainability bond, which confirms our commitment to sustainability and to support the development of the market for green, social and sustainability bonds in Europe.”

Following IPTs of the mid-swaps plus 180bp area for €500m no-grow 11 year Tier, with expected Baa3/BBB- ratings (Moody’s/Fitch), the spread was set at 155bp on the back of books above €2.2bn, with the final book around €1.65bn and some 180 accounts involved.

“We all know the drill now, when it comes to Generali,” said CACIB’s Bonnal. “They come with small, bullet transactions in ESG format, slightly extending their curve, and are able to leverage off that — this trade was no exception.

“They paid no new issue premium versus their existing ESG curve and again achieved some kind of greenium.”