June 27, 2014 2:03 pm

Coface shares rally on Paris debut

Investors who subscribed to the flotation of Coface were sitting on paper profits on Friday as the world’s third-biggest trade credit insurer returned to the public markets.

Shares in Coface, which covers the risk to suppliers that their corporate clients will go bankrupt and be unable to pay them, rallied about 6 per cent in Paris trading.

The listing price valued the equity of the insurer, originally established as France’s export credit agency after the second world war and now an arm of the bank Natixis, at €1.63bn.

All the proceeds went to Natixis, which raised €832m by selling more than half its stake.

Laurent Mignon, the bank’s chief executive, said the stock market launch would improve the bank’s core tier one ratio – an important measure of balance-sheet strength – by 40 basis points. The ratio stood at 10.6 per cent at the end of March

The listed French bank floated Coface as part of a wide-ranging effort to simplify its structure and streamline its operations. The offer raised no fresh equity for Coface. However, the insurer sought to attract investors with expansion plans.

Coface argues the market for trade credit insurance, which helps oil the wheels of global trade by insuring exports and imports, is set to expand as only 5 per cent of companies globally buy the cover.

The company, a smaller rival to Euler Hermes and Atradius that delisted in 2006, plans to increase efforts to target the small and medium-sized enterprise sector.

Coface generated net income of €127m last year on sales of €1.44bn. It would not provide prospective valuation multiples although said it plans to pay out 60 per cent of earnings as a dividend.

Shares rose €0.60 after being priced at €10.40 apiece, the middle of a range set by bankers at JPMorgan and Natixis who handled the offer. The rally added €95m to Coface’s market capitalisation.

Natixis may sell another chunk of shares, potentially raising an additional €125m, subject to a so-called over-allotment option being exercised depending on demand in the coming weeks.

This would leave Natixis with a 41 per cent stake in the trade credit insurer.

The Coface listing is the latest strategic move Natixis has undertaken in recent months in the face of regulatory pressure and a challenging economy.

It has cut hundreds of jobs and last year disposed of the 20 per cent stakes it held in two French regional lenders, Banques Populaires and Caisses d’Epargne, for €12.1bn

Natixis, a listed subsidiary of the mutual Groupe BPCE, is trying to scrap a complex corporate structure to focus on corporate and investment banking, asset management and specialist services, including consumer finance.

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