Pan-Asian insurer AIA closed its debut $1 billion dual-tranche bond late Tuesday night, marking the first time it has tapped the bond market in its 93-year history.
AIA is an iconic name, but it only became a standalone entity three years ago when it listed on the Hong Kong Stock Exchange. Its former parent American International Group raised $17.8 billion by selling shares in its Asian life insurance unit to pay back part of the bailout it received from the US government during the financial crisis.
AIA was widely considered to be AIG’s crown jewel and was described by one source as being “squeaky clean”. Since the listing, AIG has sold down all its shares in AIA and no longer has a stake in the company.
Given that it was a rare name in the market, it attracted some investors that had not been seen in a long time. The book was not overwhelming, with the deal attracting a total of $2.7 billion worth of orders.
“The pricing was aggressive,” said one source. “But it is a high-quality name and it was never going to be one of those hugely over-subscribed deals with a lot of fluff in the book.”
The proceeds will be used to partly repay and term out the bridge loan AIA took to buy ING’s Malaysian insurance business in October 2012. That acquisition made AIA the biggest insurer in Malaysia.
AIA has a market capitalisation of about $50 billion and it is well capitalised. It has excess capital of $2.8 billion, compared to about $1.6 billion at Prudential UK.
The $500 million five-year bonds priced at Treasuries plus 110bp, 10bp inside of the initial guidance, while the $500 million 10-year bonds priced at Treasuries plus 130bp, 5bp inside of the initial guidance.
Such a rare credit has few obvious comparables. According to one source, investors looked at highly rated non-insurance companies in the countries it operates in — such as Hutchison, CLP and MTR Corp in Hong Kong, or SingTel in Singapore, CDB Leasing and Sinopec in China.
The AIA 2018s traded at 112bp/109bp, around reoffer, and the AIA 2023s widened by at least 8bp to Treasuries plus 143bp/138bp. The longer dated bonds came under some pressure in part due to concerns about duration amid fears that rates could rise.
The company had set up an MTN programme last week and met with investors in Hong Kong, Singapore and London. The insurer’s senior bonds are rated A by Standard & Poor’s.
The five-year tranche attracted a $1.5 billion order book from more than 80 accounts. By geography, Asian investors were allocated 60%, European investors 36% and offshore US investors 4%. By investor type, funds were allocated 53%, banks and companies 27%, official institutions 11%, insurers 5% and private banks 4%.
The 10-year tranche attracted an order book of $1.2 billion from 60 investors. Asian investors were allocated 60%, European investors 36% and offshore US investor 4%. Funds were allocated 55%, banks 40%, private banks 3% and official institutions 2%.
Deutsche Bank and Morgan Stanley were global coordinators and bookrunners. ANZ, HSBC, Standard Chartered were active bookrunners. BNP Paribas, DBS and J.P. Morgan were passive bookrunners. CIMB was a joint lead manager.
