Generali Eu1.25bn Tier 2 impresses

Assicurazioni Generali on 20 October sold the largest euro-denominated insurance sub debt issue since March, a Eu1.25bn 32 year non-call 12 Tier 2 issue on that attracted almost Eu5bn of demand and helped the sector onto a firmer footing after signs of weakness in previous supply.

The Italian company’s deal was the first benchmark insurance sub debt in euros in almost a month, since Danica Pension and ASR Nederland had on September 21 and 22, respectively, sold Eu500m 30NC10 transactions into a difficult market (see separate article for more). The issue was the largest since Allianz at the end of March sold a Eu1.5bn 30NC10 deal that was the largest euro-denominated insurance sub debt transaction of the year.

Generali’s new benchmark was its first visit to the debt capital markets in almost a year, after it in early November 2014 had launched a tender offer for three outstanding subordinated issues and sold a new Eu1.5bn PerpNC11 deal.

Its latest transaction was launched to refinance some Eu1.25bn equivalent of subordinated debt that has its first call in June 2016.

“Our policy is to have a proactive approach to the debt capital markets in order to maintain our high flexibility as we have demonstrated also in the past,” said Andrea Nobile, head of debt management at Generali. “And in addition to that it is market standard to refinance a strategic transaction a few months in advance.”

He acknowledged that the market had not been wholly auspicious, but said that Generali’s status among investors had stood it in good stead.

“Investor sentiment towards our issuance was really positive,” said Nobile. “In recent years the Generali Group has done a lot of work to strengthen the relationships with credit investors around Europe, so as to establish an open and constructive dialogue with them.

“All of them were expecting this refinancing,” he added, “and that’s why we think the transaction was so well received by the market. We have been able to issue in stressed market situations thanks to the good perception of credit investors.”

Lead managers Banca IMI, Barclays, Citi, Mediobanca, Morgan Stanley and UBS priced the Eu1.25bn 32NC10 Baa3/BBB/bbb+ (Moody’s/Fitch/AM Best) issue at 435bp over mid-swaps on the back of almost Eu5bn of orders comprising around 400 accounts. The re-offer of 435bp followed initial price thoughts of the 450bp area and guidance of the 440bp area, and gave a coupon of 5.5%.

“The level of pricing is in line with our target and with the cost of the refinanced bonds, also thanks to the high quality of the book, which was around four times covered,” said Nobile.

The UK and Ireland took 49% of the issue, Italy 11%, France 9%, Germany 9%, and the Nordics 4%, with Asia also allocated.

After the refinancing of Generali’s sub debt callable in June 2016, the next earliest callable subordinated debt has a first call date in February 2017. Nobile meanwhile said that the company does not plan to increase its stock of debt and hence has no plans to issue additional debt.