North America Investment-Grade Bond: Allstate’s US$1.2bn diversity & inclusion bond

IFR Awards 2020
3 min read
William Hoffman

D&I for all

One of the prevailing themes of 2020 was a new urgency from corporate America to address social justice and inequality in the wake of George Floyd’s killing in Minneapolis that sparked mass protests across the country.

Several companies leveraged their relationships with “diversity and inclusion” investment banks as a way to elevate Black, Hispanic and Veteran-led firms in the capital market space.

But Allstate went above and beyond in November with a US$1.2bn bond that was the first managed entirely by such firms as lead bookrunners without the aid of bulge-bracket institutions.

“Allstate really broke through," said Spencer Wilcox, head of DCM at Academy Securities, a lead bookrunner on the trade. "There has been a progression, but it would be a mischaracterisation to call this iterative – this is a paradigm shift."

The deal was led by Black-owned investment bank Loop Capital Markets (B&D), Veteran/Hispanic-owned firm Academy Securities, Hispanic institution Ramirez and Black/women-owned firm Siebert Williams Shank.

Diversity efforts also extended to the co-managing group, which comprised veteran-owned AmeriVet Securities, women-owned firms CL King and R Seelaus, as well as Hispanic-owned firms Cabrera Capital Markets and Penserra Securities.

The firms did not miss the opportunity to prove themselves.

Allstate evenly split the transaction into five-year and 10-year notes that priced at 37.5bp and 65bp over US Treasuries, respectively, achieving a 0.75% coupon on the five-year that set a new low for insurance paper at that part of the curve.

“This was a year where people said, ‘let’s kick this up a notch and see if they are ready for prime time’,” said Sam Ramirez Jr, senior managing director at Ramirez. “We’ve been ready for prime time for years.”

The deal was born out of the strong relationship between Allstate CEO Tom Wilson and Loop Capital CEO James Reynolds Jr, who are co-chairs on the GET IN Chicago initiative raising private money to combat gun violence in the city.

When Allstate began planning its funding needs to help finance the US$3.7bn cash portion of its acquisition of National General, Wilson personally pushed to elevate Loop and the other D&I firms on the transaction, according to bankers on the trade.

D&I firms have received ample support from big banks over the years, most notably Citigroup, which was the bulge bracket support on several previous corporate deals. Those efforts are working as Allstate’s deal could push other companies to elevate D&I firms.

“We are not alone – there are probably 500 other issuers that have credibility, the ratings and comfort in the marketplace that we do,” said Allstate treasurer Mike Pedraja. “We think a lot of other issuers can execute along the same lines that we have.”

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