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Price guidance tightened on Tokio Millennium Re’s Spectrum cat bond


The price guidance has been tightened on both tranches of sponsoring reinsurance firm Tokio Millennium Re’s Spectrum Capital Ltd. (Series 2017-1) catastrophe bond, with one tranche seeing pricing fall to below the initial coupon range.

Tokio Millennium Re’s first full catastrophe bond issue, the $250 million sized Spectrum Capital 2017-1, was launched to the ILS investor community at the end of May, seeing the reinsurers Tokio Millennium Re AG Bermuda branch looking to secure a fully-collateralized and capital markets backed layer of retrocessional reinsurance protection.

The $250 million cat bond deal is split into two tranches of notes that will provide Tokio Millennium Re with derivative-style retrocessional reinsurance protection across almost four years, with industry loss triggered coverage against losses from U.S. named storms, earthquakes, severe thunderstorms, wildfires, winter storms, and Canada earthquakes.

The deal is currently split into a Spectrum Capital Series 2017-1 Class A tranche of notes that targets $100 million of annual aggregate coverage, while a $150 million Class B tranche of notes aims for per-occurrence coverage against losses from second and subsequent events.

The price guidance has been narrowed for both tranches, with the Class A notes also seeing the price drop. The Class A notes were launched with coupon guidance in a range from 6% to 6.75%, but we understand this has been narrowed and fallen to 5.75% to 6%, so below the originally marketed range.

Meanwhile the Class B notes which had initial price guidance of 3.25% to 4% have seen their pricing narrow towards the middle of that range, at 3.5% to 3.75%.

We’re told the Spectrum Capital cat bond transaction could also be upsized before it closes, if the final pricing is conducive to doing so. We’ll update you should we hear anything further on that.

This Spectrum Capital Ltd. (Series 2017-1) cat bond is set for completion next week, we understand. You can read all about this and every other catastrophe bond in the Artemis Deal Directory.

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