Kilimanjaro Re Ltd. (Series 2015-1) – Full details:
With this Kilimanjaro Re 2015-1 issuance, Artemis understands that Everest Re is looking to expand the fully-collateralized retrocessional reinsurance cover it receives from the capital markets. The notes issued, which will be in two tranches, will both have a four-year term and both provide cover across the U.S., Canada, District of Columbia and Puerto Rico.
So Kilimanjaro Re 2015-1 comes out of the blocks at $300m in size, split into two tranches of notes, each of which are exposed to the same perils across the covered area. Both tranches of notes will provide per-occurrence reinsurance protection to Everest Re and both use a location-weighted industry loss trigger, based on data reported by Property Claim Services (PCS).
The first tranche, a Kilimanjaro Re 2015-1 Class D tranche of notes, has a preliminary size of $125m. The Class D tranche has an initial index attachment point of $1.257 billion, covering a pro-rata share of losses up to an exhaustion point of $1.816 billion.
The second, Class E tranche of notes has a preliminary size of $175m and are the less risky of the two, with an initial index attachment point of $1.841 billion covering up to exhaustion at $2.521 billion.
The Class D notes have an initial attachment probability of 6.25%, we understand, with an initial expected loss of 4.71% (5.25% on a WSST sensitivity basis). This $125m tranche is being marketed to investors with price guidance of 9% to 9.75%, we’re told.
The Class E tranche meanwhile have an initial attachment probability of 3.58% and an initial expected loss of 2.7% (3% on a WSST sensitivity basis). This $175m tranche is being marketed to the investor base with price guidance in a range of 6.5% to 7%.
In terms of the multiple, or ratio of expected loss to potential pricing giving a view of the risk/return characteristics of the cat bond tranches, both are roughly aligned with recent issuance.
The Class D tranche, with has a multiple at the mid-point of price guidance of 1.99x at the base case, or 1.79x at the sensitivity case. The Class E tranche has a multiple at the mid-point of price guidance of 2.5x at the base case and 2.25x at the sensitivity case.
The Kilimanjaro Re 2015-1 catastrophe bond more than doubled to $625m while marketing.
The Class D tranche, which is the riskier of the two, grew to $300 million in size, while the Class E tranche has upsized to $325 million.
As well as upsizing to $625 million in size, the price guidance for both tranches of Kilimanjaro Re 2015-1 notes was fixed.
When the deal launched the Class D tranche had spread guidance of 9% to 9.75%, making it one of the highest coupon cat bond offerings for quite a while. We understand that the guidance has now been fixed at 9.25%, so towards the lower end and just below the mid-point of guidance.
Conversely, the Class E tranche which is now the largest, and lower risk, looks set to price at the mid-point. This tranche launched with price guidance of 6.5% to 7%, but we understand that has been fixed at 6.75%.
At 9.25% the Class D tranche of notes would pay ILS investors a multiple of 1.96 times the expected loss of 4.71%. The Class E tranche, at 6.75%, would pay investors a multiple of 2.5 times the expected loss of 2.7%.
The deal priced at the above levels, with the $300m Class D tranche offering a coupon of 9.25% and the $325m Class E tranche 6.75%.