Macif capitalised on the hype surrounding its acquisition of Aviva France to generate huge demand for its three-part M&A-financing sub debt offering on Monday.
The French insurer pulled in more than €14bn of orders to the €1.75bn deal as investors rushed to buy into its compelling story.
The deal was billed as one of the most hotly anticipated transactions in the insurance sector this year, having been expected since Aviva agreed the sale of its French operations to Macif's Aema Groupe in February. The €3.2bn deal is expected to close by the third or fourth quarter of 2021.
As the mutual does not have access to the equity market, Aema was looking to refinance its €3.2bn bridge facility with a combination of available cash and the issuance of €1.75bn of new subordinated debt through Macif, which will be the issuing entity of the new group.
Aema – which itself was only formed in January through the merger of Macif Group and Aesio Mutuelle – had said the acquisition of Aviva France will make it a well-balanced, key insurance provider among the top five in all segments of the French market, with revenues of €16bn.
"Investors well understood the credit and the relevance of the acquisition, and this was also an opportunity to invest in a new name in the insurance sector ... this was really a marketing of a new company, especially given the different parameters and scope of the new entity," said a banker at one of the leads. "It is going to be one of the biggest insurance companies in Europe."
Macif last tapped the market in October 2014, according to IFR and Tradeweb data, selling a €124m perpetual non-call 2024, but is now expected to be a more frequent visitor.
"Macif is due to be more active in the next couple of years, so it's a name as an insurance specialist you cannot afford not to strongly look at," said a banker away from the leads.
"Investors might assume this is a name that has potential to trade better and be stronger than a Groupama or La Mondiale, for example, and if you buy into that then these levels still look attractive."
Believing the hype
The deal was marketed in three days of investor calls last week before it hit the screens on Monday.
The €400m perpetual non-call eight-year RT1 was offered with initial price thoughts of 4.125% area, before being launched at 3.5%, with books exceeding €4.5bn.
The €850m 31-year non-call 11 Tier 2 won the biggest book of the three. It was marketed with IPTs of mid-swaps plus 250bp area and launched at 205bp on the back of more than €6.5bn of orders.
The €500m six-year Tier 3 started with IPTs of 130bp area and landed at 95bp, with books over €3bn.
It was the first time an insurer has tapped each of the three asset classes in one transaction, according to bankers at the leads.
"It was interesting for investors to have the ability to buy the name in different formats, as the tranches will have appealed to different geographic investor bases and types of investors," said a second lead banker.
The inaugural nature of the deal made pinpointing fair value difficult. Bankers deemed the IPTs to look relatively generous versus secondary market comparables, reflecting the issuer's size target, but said each of the tranches was ultimately launched close to where more established peers would land in the market.
Bankers cited as comparables insurers such as La Mondiale, Ageas and Achmea, whose RT1s were bid at yields between the low and mid-3s, pre-announcement.
Most Tier 2 comparables were cited at spreads between the high 150s and the mid-170s, though many of those are bullet transactions or are shorter dated. In the smaller Tier 3 market, French issuers were trading between 70bp and 90bp.
"It's outstanding how much they've been able to leverage off the hype around the deal to substantially decrease any spread or premium over more established names," said the banker away from the deal.
Providing comfort
Macif said the issuance will strengthen the new group's capital structure and solvency position.
Aema Groupe's Solvency II ratio was at 159% at the end of the first quarter, taking into account the impact of the Aviva France acquisition and its new subordinated issuance, but Aema aims to push the ratio up to 190% by 2024 through organic capital generation.
Market participants noted the pro forma Solvency II ratio is lower than some peers' – such as CNP Assurances and Ageas – but the first lead banker said the issuer was able to demonstrate to investors that it will have a robust capital position.
"The company was able to provide a credible plan in terms of their organic capital generation in order to achieve these figures, so that provided some comfort," he said. "In addition, the company presented their sensitivities to market movement and outlined measures the management could implement quickly to counter mart volatility."
The RT1 notes are expected to be rated Ba1 by Moody's, while the Tier 2 and Tier 3 bonds are expected to be rated Baa1.
BBVA, BNP Paribas, Credit Suisse, HSBC, ING, JP Morgan, Natixis, RBC and Societe Generale were bookrunners on the deal.