Several big-time U.S. banks and companies have committed tens of billions of dollars this year to fight racism after the police killing of George Floyd, and the Black Lives Matter protests. Allstate Corp., among the nation’s largest home and car insurers, is applying a different strategy to address racial inequity nationwide and to advance diversity empowerment including financial districts such as Wall Street.
The 90-year-old, Illinois-based firm has announced that it priced $1.2 billion of 5-year and 10-year senior notes via a syndicate made up of only minority, women and veteran-owned business enterprises (MWVBEs).
The historic pact is significant as Allstate claims it is the first time that a corporate bond offering of this size has been managed exclusively by those firms.
The deal is game-changing as diverse firms commonly have lesser roles and duties for allocations.
Mainstream larger banks generally work with larger companies on such bond deals, aiming to capture a chunk of their more profitable capital markets business.
For the offering, Allstate hired Loop Capital Markets, Academy Securities, Ramirez & Co. Inc., and Siebert Williams Shank as joint bookrunning managers. AmeriVet Securities, Cabrera Capital Markets L.L.C., C.L. King & Associates, Penserra Securities L.L.C. and R. Seelaus & Co. L.L.C. were co-managers. Those firms will each gain in fees a portion of the $1.2 billion debt, Allstate reports. The insurer will use the funding to help pay for its $4 billion acquisition of National General Holdings Corp., a purchase expected to close early next year.
“It is time to take a stand to create more equity in the securities markets,” Tom Wilson, Allstate’s chair, president and CEO, stated in a news release. “Diverse firms have the capabilities to increase their market share as evidenced by the results of this transaction. Allstate is committed to doing even more, including doubling our trading volume with diverse firms in 2021. Sustainability will require the commitment of other corporate bond issuers, investment managers and leading investment banks, many of whom have extensive programs that are being expanded. Equity is good for all of us!”
As of Sept. 30, Allstate has an investment portfolio of $91.2 billion, a huge amount diverse firms can potentially benefit from.
Jim Reynolds, chairman and CEO of Chicago-based Loop Capital, which ranks No. 1.on Black Enterprise’s 2019 BE Investment Banks list, stated, “We are delighted that our long-standing relationship with Allstate enabled us to source capital for them and live into our mantra of putting clients first.”
Purportedly, diverse firms are getting more business from the corporate the bond market this year with companies’ increased attention and greater focus on combating racial issues.
Mario Rizzo, Allstate’s chief financial officer, stated, “This successful transaction highlights that issuers can benefit by leveraging the talent in MWVBEs while creating more equity in the financial markets.”