Swiss Re pounces on hot dollar Reg S market

IFR 2298 31 August to 6 Septembert 2019
2 min read

Swiss Re demonstrated the volume of cash available in the US dollar market last week as it attracted US$8bn-plus of orders for a US$1bn perp non-call five Tier 2 transaction, with Beazley Insurance lining up to follow suit.

The deal came after a US$500m Additional Tier 1 from Swedbank the previous Thursday, which attracted final demand in excess of US$4.75bn and was seen pricing flat to fair value even though the Swedish lender is embroiled in a money-laundering scandal.

A syndicate banker at one of Swiss Re’s leads said the insurer’s deal was already in the pipeline but the strength of Swedbank’s AT1 had been encouraging.

Swiss Re emerged last Tuesday, with leads BNP Paribas, Bank of America Merrill Lynch, Citigroup, Credit Suisse and Morgan Stanley marketing the transaction with initial price thoughts of 4.75%.

“There’s clearly demand as the first book update showed,” said the lead banker. “We had over US$4bn early on.”

Guidance was subsequently set at the 4.375% area before the coupon was set at 4.25% and the size at US$1bn, with books rising above US$8bn (pre-rec).

Bankers deemed that an impressive result, especially given fair value was seen in the low 4s. “It’s absolutely flown,” said a banker away from the deal.

The deal was issued through Swiss Re Finance (Luxembourg), which is guaranteed by Swiss Reinsurance Company and rated Aa3/AA–/A+ by Moody’s/S&P/AM Best.

It is only the second US dollar benchmark issued out of the subsidiary, the first was a US$1bn 30-year non-call 10 subordinated deal in March. That trade was quoted at a yield-to-call of 3.698%.

It follows a change in tax laws in Switzerland that allows issuance without having to use a repackaging vehicle for withholding tax purposes, a structure unpopular with US investors.

Further insurance supply is in the pipeline, as Beazley Insurance announced that it has mandated for meetings ahead of a Reg S US dollar or sterling denominated 10-year subordinated Tier 2 transaction.

The roadshow began last Thursday, visiting Singapore, Hong Kong and London.

JP Morgan Cazenove, Lloyds Bank Corporate Markets Wertpapierhandelsbank and NatWest Markets have the mandate.