Reuters: Bankruptcy News: CNP shows compelling Asian bid for capital deals

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CNP shows compelling Asian bid for capital deals Jul 12th 2013, 12:48 Fri Jul 12, 2013 8:48am EDT * French insurer draws support from Asian private banks * Fed's comments to bolster confidence in capital demand By Aimee Donnellan LONDON, July 12 (IFR) - CNP Assurances gave a much-needed boost to the dollar Reg S market this week by showing there is still a substantial bid from Asian private banks for capital deals, soothing concerns that demand may have tailed off following a sell-off that began in late May. CNP's USD500m perp non-call six-year deal attracted over USD3.75bn of orders from a mix of European and Asian accounts, which vindicated the lead managers' decision to wait three weeks after completion of the roadshow to launch the trade. A strong market backdrop throughout the week, reinforced by Federal Reserve Chairman Ben Bernanke's dovish comments on Wednesday, was the catalyst for the deal to come to market. The iTraxx Subordinated index has been particularly volatile, reaching a three-month wide of 293bp at the end of June, but recovering some 60bp since then and trading flat at 235bp on Friday. "It took us a few days to pluck up the courage to pull the trigger on this deal, but once we saw the way the Asian market was moving earlier this week we thought it would go well," said one lead banker. The bond is considered to be an important test of Asian support for Reg S deals that have been few and far between in the past few months. UNLOCKING THE MARKET Before QE tapering fears first surfaced in late May, European institutional investors had begun to play a more dominant role in capital deals. In BBVA's 9% Additional Tier 1, which priced in early May, for example, European investors accounted for 73% of the USD9.25bn book. That marked a significant change from issuance earlier in the year, including Axa's 5.5% USD850m non-call six sub in January where high net worth accounts in Asia took 42%. The CNP deal ends a two-month drought of European insurance Reg S deals. The last was La Mondiale's USD600m perpetual note in April. British insurer Aviva last week opted for euros. Evidence that Asian demand appears robust, however, should encourage other issuers to launch capital deals, especially as there are at least six Tier 2 bonds that have been put on hold due to choppy market conditions. One potential candidate could be Austrian insurer Uniqa, which is preparing a European-focused roadshow for next week ahead of a possible transaction. BNP Paribas, JP Morgan and RBI have been named as lead managers. STRONG BOOKBUILD Lead managers Barclays, BNP Paribas, Citi, HSBC, Natixis and Societe Generale began marketing the CNP bond on Thursday at low 7%, and by the end of day indications of interest were in excess of USD800m following a solid response from European accounts. Books opened on Friday, with guidance refined to 7% area as orders climbed over USD2bn after Asian accounts had looked at the deal. The offering was then sized at USD500m, and as books grew to over USD3.75bn, the final yield was fixed at 6.875%. In what is clearly a positive for the issuer, the deal will pay a lower coupon than a carbon copy EUR500m perp non-call six trade issued by CNP in October last year that pays 7.5%. That bond is now bid to yield around 6%, according to Tradeweb. In terms of the structure, the CNP bond, which is expected to be rated A- by S&P, has a first call date of July 18 2019 and interest will be paid semi-annually until that point. After the first call date, coupons will reset every six years to the prevailing six-year mid-swap rate plus the initial margin. Coupons are cash cumulative, optionally deferrable, and will be subject to a six-month dividend pusher, meaning CNP cannot defer a coupon if it has paid dividends in the previous six months. However, investors may see their coupons deferred if CNP is deemed to have a regulatory deficiency. CNP has also announced its intention to buy back up to EUR500m of its EUR1.25bn perpetual non-call December 22 2016 junior subordinated notes. The cash tender offer is subject to the successful sale of the new CNP bond. BNP Paribas, Barclays, Citigroup, HSBC, Natixis and SG are dealer managers on the liability management exercise, with BNP as tender agent. Link this Share this Digg this Email Reprints

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