RCI Banque makes standout AT1 debut
RCI Banque, the financing arm of Renault, rode a wave of demand as it priced its inaugural Additional Tier 1 bond on Wednesday, with the novel €400m perpetual non-call 5.5-year transaction ending up more than 18 times subscribed.
While RCI Banque, which is fully owned by Renault and has been supervised as a bank by the European Central Bank since 2016, is a regular issuer in the senior unsecured market and also now established in the Tier 2 market, its new issue is something of a rarity. Examples of automobile captive finance firms or entities from non-traditional banking groups issuing AT1 capital remain few and far between.
In 2019, vehicle leasing company LeasePlan, which was regulated as a bank in the Netherlands, sold an inaugural €500m 7.375% AT1, though that deal was redeemed in May 2024 and was not replaced with a publicly issued bond. LeasePlan had by then been acquired by ALD, a subsidiary of Societe Generale. The combined entity, now known as Ayvens, draws on SG for its regulatory capital rather than the public market.
Other car financing firms that have a bond market presence but, unlike RCI, are part of banking groups, such as Credit Agricole's CA Auto Bank or BNP Paribas' Arval, also rely on their parent entities for their regulatory capital needs.
While in some markets such unfamiliarity could prove challenging in a subordinated transaction, in the current market investors have proven to be exceptionally keen on deals offering diversification and yield.
RCI could take advantage of highly supportive market conditions for higher-yielding capital transactions, coming after a series of bank AT1s that have attracted multibillion order books across currencies. Relatively low levels of FIG supply for the time of year have meant issuers have regained the upper hand in pricing terms, and valuations across the euro AT1 market have become compressed, with a wide range of issuers pricing in the mid-5s to low-6s context.
"Anything coming with a bit more juice, adding that extra bit of yield – that's what investors in investment-grade want," said a corporate DCM banker away from the leads, who said the deal was "set to fly".
After two days of marketing, leads Citi, Credit Agricole, Natixis and Societe Generale opened books for the €400m (no-grow) trade with initial price thoughts of the 6.75% area. As market participants had predicted, demand was quick to come in, with the leads reporting that orders were in excess of €3bn before 9:30 UK time.
The leads subsequently revised guidance to the 6.25% area (plus or minus 12.5bp, will price in range) with demand having doubled to above €6bn.
The coupon was set at 6.125% with demand having risen further still to €7.4bn-plus. The final book remained at that level after final terms were set.
A lack of direct comparables meant there was a range of views on fair value, but most bankers put it in the range of 6% to 6.25%.
The deal's pricing put it at the higher end of a range of coupons for recent euro AT1s from banks, offering a pickup to a €500m perpetual non-call 10-year priced at 5.875% by CaixaBank on Monday, but still in line with deals such as a €1bn 6.125% perpetual non-call seven-year AT1 priced by Societe Generale on September 10.
“It’s a strong trade and clearly it offers relative value against recently priced AT1 transactions … at 6.125% we are in the ballpark of RBI and we are 25bp [higher] than CaixaBank for five-years less," said a FIG syndicate banker away from the deal. "It’s a strong result given that they were able compress by 5/8ths."
RCI's AT1, which is expected to be rated Ba3 by Moody’s, also offered a clear pickup over corporate hybrids. On Wednesday, for example, Veolia Environnement priced an €850m perpetual non-call 7.33-year hybrid at 4.325%. Veolia had started marketing the deal, which is expected to be rated Baa3/BB+ (Moody’s / S&P), a full 200bp inside the IPTs of RCI's AT1.
"Something with a six handle on it is going to be very interesting for anyone chasing yield at the moment," said a corporate syndicate banker. "Most people who can, will have a look at it, purely because it offers a really good yield."
The response to the deal also showed that investors were not put off by uncertainty around the auto industry. While Renault does not sell into the US and so is therefore less exposed to tariffs than some of its rivals, it has still been hit by other sectoral headwinds, such as competition with China.
RCI said the inaugural deal is intended to optimise its capital structure and strengthen its total capital ratio, which stood at 15.4% as of the end of the first half of 2025, in anticipation of future balance sheet growth. RCI has fully utilised its Tier 2 capacity after issuing its two transactions in the last 15 months.
The bank's total capital ratio fell from 17.7% as of the end of 2024 mainly due to the implementation of CRR3 regulation, but also due to asset growth.
The new issue is also aimed at strengthening rating metrics including S&P's Risk-Adjusted Capital ratio and Moody's Loss-Given Failure analysis.
Additional reporting by additional reporting by Lucy Frost and Malicka Sielinou