Price guidance lowered for Prologis’ new $95m Logistics Re US quake catastrophe bond

We’re told by sources that the price guidance range has been lowered for the second catastrophe bond to be sponsored by Prologis, Inc., the logistics, warehousing and supply-chain focused real estate owner and investor, while the target size remains at $95 million for its new Logistics Re Ltd. (Series 2024-1) US earthquake cat bond issuance.

Artemis reported back at the end of September that Prologis, Inc. had returned for its second venture into the catastrophe bond market, looking for a renewal of its soon to mature first deal.

Prologis secured $95 million of multi-year, earthquake focused property catastrophe insurance protection through the successful issuance of a Logistics Re Ltd. (Series 2021-1) cat bond in the fourth-quarter of 2021.

That first Logistics Re cat bond issued in 2021 is scheduled to mature in December of this year and so the company has now returned to sponsor a renewal, as we reported.

The company operates as a real estate investment trust, both owning and investing in commercial real estate assets, typically linked to the warehousing, logistics and supply-chain sectors and with a United States focus, although it does have some global operations as well.

SPI Logistics Re Ltd. is aiming to issue a single $95 million Class A tranche of Series 2024-1 catastrophe bond notes that will provide retrocessional reinsurance to Hannover Re, which in turn will then provide the reinsurance directly to captive insurer, Solution Insurance Ltd. which will in turn insure Prologis, Inc.

The $95 million of Series 2024-1 Class A notes Logistics Re is issuing will provide Prologis with a just over three-year source of US earthquake insurance protection on an indemnity and per-occurrence basis, with maturity slated for mid-December 2027, we’re told.

There will be some overlap in coverage between the two cat bonds, as the 2021 issuance matures at that December point, but this new 2024 cat bond issuance is expected to settle before the end of October.

The exposure is again largely focused on California, with assets covered there contributing as much as 95% of the expected loss, the same as the first deal.

The Logistics Re Series 2024-1 Class A notes will have an attachment point at $400 million of losses to Prologis’ insurance tower and cover a percentage of losses up to $550 million, which gives them an initial attachment probability of 3.1% and an initial expected loss of 2.6%.

The notes were initially offered to cat bond investors with spread price guidance in a range from 6.75% to 7.25%.

We’re now told that the size of the issuance has not changed, still being marketed at $95 million, but the spread price guidance has now been reduced, with an updated range of 6.25% to 6.75% now being offered to investors.

The first 2021 cat bond from Logistics Re priced to pay investors a multiple-at-market of almost 3.2 times the expected loss, but its initial expected loss was only 1.094%.

So, the comparison is a little challenging, but for reference at the mid-point of the revised guidance, the multiple-at-market paid for this new Logistics Re 2024-1 cat bond would be 2.5 times the expected loss.

Multiples are usually lower, where the EL is higher and as we reported in our first article on this deal, we do understand there have been exposure changes over the time since the first cat bond was issued, as Prologis has built out its investments and real-estate assets in the areas covered.

You can read all about the Logistics Re Ltd. (Series 2024-1) catastrophe bond and every other cat bond issuance in our extensive Artemis Deal Directory.