Acquisition financing can always run into difficulties, as Axa found out to its cost last month when it printed its €2.25 billion equivalent hybrid debt deal at the high-water mark of volatility. The deal, which financed the purchase of Winterthur from Credit Suisse, was adversely affected by weak equity markets, high hybrid supply and by a surprise announcement by Generali that it would borrow an addition €1.2 billion of hybrid for an acquisition.
Under normal market conditions the tier 1 equivalent deal would have been considered extraordinarily cheap. The €1 billion perp non-call 10 tranche came at mid swaps plus 150 basis points, some 25bp back of where Generali and Swiss Re were trading.