Borrowers have largely steered clear of
the subordinated sector given the volatile
backdrop, but P&V was one of two sub-
benchmark insurance deals last week, with
Italy’s VITTORIA ASSICURAZIONI bringing a
€250m 10-year Tier 2 the same day.
The bond was issued to simplify and
strengthen P&V’s capital structure while the
company also wanted to gain a foothold in
the market and widen its investor base
should it wish to raise further debt.
The deal priced in line with guidance at
5.50% via sole lead Natixis, drawing around
€400m in orders. It was sized at €390m, just
SHORTûOFûTHEûõMûMAXIMUMûTARGETûTOû
support secondary trading. The bond was
QUOTEDûROUGHLYûmATûONû&RIDAY ûACCORDINGûTOû
Thomson Reuters prices.
It shows that the market is open even for
off-the-run names, though the backdrop
remains tough and several recent trades
HAVEûBEENûPOSTPONEDû##2û2EûFORûEXAMPLEû
put a planned €100m-€150m RT1 on hold,
citing volatile conditions.
“The difference between the market now
ANDûTHREEûMONTHSûAGOûISûDElNITELYûINûTERMSû
of pricing, because the size was there,” said
Gabriel Levy, global head of DCM for
lNANCIALûINSTITUTIONSûATûNatixis.
4HEûI"OXXûEUROûSUBORDINATEDûINSURANCEûINDEXû
has jumped to 3.12% from around 2% in January.
However, the company’s credit quality meant it
found buyers despite the market backdrop.
P&V is a co-operative insurance group,
RANKEDûlFTHûINû"ELGIUMûWITHûAûGROWINGû
market share operating in both the life and
non-life segments. It last reported a Solvency
II ratio of 172%.
“Also, the lenders on the subordinated
loans had agreed to move forward into the
new public transaction, which provided a
good signal to new targeted investors,” said
Levy. “So we got momentum there to launch
the transaction.”
Vittoria Assicurazioni’s transaction was also
its inaugural issue. The €250m no-grow 10-
YEARûBULLETûRATEDû"""
ûPRICEDûATû ûINSIDEû
6% area IPTs on more than €450m of demand.
“We got a very good response early on,”
said a lead on the deal. “It’s a good credit
WITHûAûGOODûPROlLE ûBUTûITûWASûPRICEDûFORû
Italian risk and recent volatility.”
Unipol’s €500m 3.875% 10-year was
trading in the high 5s and Sociata Cattolica
di Assicurazione’s €500m 4.25% 30-year non-
call 10s in the high 4s, some of the best
comparables, though benchmark in size and
sub-investment-grade rated.
“Timing was key,” the lead said. “We
decided to wait after quarter-end as this was
a high-beta trade, and it would have been
easy to pass.”EUROCLEAR BANK DEBUT EURO HITS
SWEETSPOTInvestors rushed to the defensive, well-rated
debut euro transaction from EUROCLEAR BANK,
intended to improve its liquidity position in
line with regulation.Management met accounts in the days
before leads JP Morgan and Societe Generale
opened books on a €500m two-year FRN and
õMûlVE
YEARûlXED
RATEûISSUE
Guidance was revised to three-month
%URIBORûPLUSûBPû70)2 ûANDûMID
SWAPSû
PLUSûBPû70)2 ûRESPECTIVELY ûFROMû
25bp area and low 40s. Both tranches were
priced at the tight end and books closed at
€1.9bn-plus on the FRN and €1.6bn for the
lXED
Those levels offered concessions of just
2bp and 5bp.
4HEûBONDSûBENElTûFROMûSOMEûOFûTHEûBESTû
RATINGSûINûTHEû%UROPEANûlNANCIALûPREFERREDû
SENIORûMARKET ûATû!!!! û30&ITCH
.ORDEAû"ANKû!A!!n!!n û3%"û!A!
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among the pricing comparables, but those
carry lower ratings despite being among the
strongest European banks.
“The market opened on a strong note so
we had a bit of tailwind behind us,” the lead
said. “It’s probably the sort of thing people
want to look at - short-dated and high
quality.”
The issuer is part of Euroclear Group, a
central securities depository providing post-
trade services. Euroclear Bank, which is
directly controlled by Euroclear SA/NV,
provides credit to market participants to
facilitate settlement. It held €12.8trn of assets
in custody for its clients at the end of 2017.
The proceeds will improve the issuer’s
liquidity position by increasing its QLSBONDS FIGBanks find deep pockets in 10-year
FINANCIALS Ten-year tenor proves attractive despite difficult backdropLA BANQUE POSTALE and CREDIT AGRICOLE found
deep pockets of investor demand for their
10-year deals last week, a reassuring sign for
financials wanting to extend duration in what
remains fiendishly difficult to navigate markets.
Investors’ reduced appetite for risk and
duration has curtailed financial institutions at
the short-end of the curve of the euro market in
recent weeks but the two French lenders found
ample demand for their transactions.
“The tenor is not obvious but when you
look at secondary curves, you can see that
issuers’ curves are flat, the main reason being
that 10-year paper is tightly held by insurance
companies,” said a lead on LBP.
LBP started marketing the 10-year, its
second senior non-preferred after an
inaugural trade last year, at 130bp-135bp over
mid-swaps.
But final books over €1.3bn meant that leads
BNP Paribas, Credit Agricole, Citigroup, HSBC
and UBS were able to revise the spread to 120bpover, offering a 5bp-10bp new issue premium for
the €750m deal.
“There’s scarcity value to the name and we
were able to hit a very precise part of the curve
where there’s investor interest,” the lead said.
A 2% coupon was particularly appealing for
insurance companies looking for yield.
“It’s a similar dynamic in covered bonds,”
he added. “We’ve found that if you hit the right
part of the curve, you can get significant order
books.”
Credit Agricole priced a €1.5bn 10-year
covered on books of over €2bn on Monday, via
Bankia, BBVA, Commerzbank, Credit Agricole,
Deutsche Bank and UniCredit.
“Just like the Caffil trade, we saw that LCR
portfolios were keen to buy as it offered a positive
spread over mid-swaps,” the banker said.
“So, you get the traditional asset managers
and treasury ALM interest too.”
The attractive pick-up over government bonds
was another draw for investors, with the CreditAgricole bond offering around 30bp over France.
It came at 3bp over mid-swaps.
The transactions’ strong results, in particular
LBP’s, was a much needed fillip for a market that
has struggled in recent weeks.
AIB Group, for example, sold a €500m seven-
year holdco on books of just over €500m after
markets turned during the execution process.
The lacklustre demand meant pricing got stuck
at the 180bp area IPTs.
“I think we were surprised to the upside,”
a second banker on LBP said. “We weren’t
guaranteed a €750m trade here. Pricing was fair
but didn’t feel like it was giving it away either.”
But while 10-year is clearly open for some names,
not all issuers would be able to go that long.
“It’s not a tenor everyone should be targeting
but for the right issuers, the 10-year tenor is
definitely interesting in these markets where
you lose a lot of the more momentum-driven
accounts,” said the second banker.
Helene Durand