Europe Financial Bond: Aema Groupe’s €1.75bn three-tranche bond

IFR Awards 2021
3 min read
Tom Revell

Joining the big league

French mutual insurer Aema Groupe did not even exist until after the turn of the year – at least in anything like its current form.

It was established in January 2021 through the merger of Macif Group and Aesio Mutuelle.

But that was just one step. To realise its ambitions to become a top five player in the French insurance industry, Aema had to go further.

It set its sights on the French business of Aviva, placed up for sale, and in February emerged as the successful bidder, with the cost of the transformational acquisition coming in at €3.2bn.

As the mutual does not have access to the equity markets, it sought to refinance its bridge facility with a combination of available cash and the issuance of €1.75bn of subordinated debt through Macif, the issuing entity of the new group.

Given Macif had last tapped the bond market in October 2014, selling a €124m RT1, that truly meant entering the big league.

Seeking to hit its funding target as soon as possible and to build a diversified capital structure, Aema took the bold and unusual approach of simultaneously offering investors Restricted Tier 1, Tier 2 and Tier 3 paper.

It was the first time an insurer had tapped all three asset classes in one transaction.

“Some other banks said it had never been done … we proved it can be done,” said Khalid Krim, head of EMEA DCM and head of investment-grade capital markets for the EU at Credit Suisse, a global coordinator along with HSBC and Natixis.

In an extensive marketing effort, Aema set to work convincing investors of its vision.

“We want to build something; we want to build a new group,” said Jean-Yves Icole, head of investor relations at Aema. “That is what is important about this transaction.”

Also crucial was that investors were made comfortable with the deal’s M&A call – a first for a financial institution’s bond – which allowed Aema to redeem the notes if the acquisition did not go ahead.

The three-tranche approach paid off, allowing Aema to hit different investor bases, optimise funding costs and vary the tenors, thereby building a more manageable redemption profile.

The company landed a €400m perpetual non-call eight-year RT1, a €850m 31-year non-call 11-year Tier 2 and a €500m six-year Tier 3.

The deal pulled in around €12bn of demand, with some 270 investors lured in by the unique opportunity to gain exposure to a new name that would soon become one of the biggest insurance companies in Europe.

“Aema convinced the market that they had the know-how to make this thing work,” said Charlie Morin, head of EMEA insurance DCM at Credit Suisse.

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