Allianz Attracts $12.3 Billion in Perpetual Bond | Money News

(Bloomberg) — Investors positioned orders totaling more than $12.3 billion for Allianz SE’s newest batch of dangerous bonds in a deal that traders stated may set the tone for the subordinated debt market.

The German insurer is set to price a $1.25 billion perpetual Restricted Tier 1 bond on Tuesday, in keeping with a individual acquainted with the matter, who requested to not be recognized. The notes carry an annual coupon of 6.55%, down from initial ideas of 7.125%, stated the individual.

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The deal comes as traders in insurance coverage RT1s and the equal Additional Tier 1s in banking — each deeply subordinated junior bonds — are beginning to raise purple flags about pricing no longer capturing the dangers. With AA-rated Allianz being the most important issuer of RT1s, the quantity it achieves is set to be a benchmark.

“Where they print will give you a very good insight in terms of how investors are thinking about the different risks around the AT1 or RT1 market,” stated Laurent Frings, head of European credit analysis at Aegon Asset Management.

In Frings’ view, the risk of default or a skipped coupon could be very low with a identify like Allianz. That leaves the query of whether or not the insurer calls the perpetual debt — generally known as extension risk — as the principle issue to contemplate for its RT1s.

“When you have an issuer who’s very open that they will take an economic call policy with those instruments, it would be very interesting to see to what extent investors price this properly,” he stated.

All 4 of its current RT1 bonds have largely traded beneath face worth since they had been issued, as merchants can’t inform whether or not any subsequent points will probably be low-cost enough to switch them.

Allianz can also be seeking to buy back as a lot as $1 billion of a $1.25 billion RT1 word at 99.65% of face worth. That course of is predicted to final a number of weeks, with the word callable at par come mid-November.

Tuesday’s offering will push annual RT1 provide to a document, beating final 12 months’s €5.78 billion ($6.75 billion), in keeping with information compiled by Bloomberg.

“With yield-hungry investors actively seeking opportunities, the outlook for the RT1 segment remains positive,” stated Dinesh Pawar, head if insurance coverage debt at Twelve Securis. “Both supply and demand dynamics suggest that momentum will carry forward.”