LONDON, Dec 14 (IFR) - UniCredit sold a 500m Additional
Tier 1 bond to a select group of investors on Wednesday,
surprising the market just a day after it unveiled a 13bn
rights issue to plug a 12.2bn hole primarily created by bad
The new trade came at par with a 9.25% coupon, much higher
than UniCredit's previous AT1s. But this offered only a 25-35bp
new issue premium to where its 1bn 6.75% perpetual non-call
2021 was trading, a modest discount given the privately placed
deal's lack of an offering memorandum and the fast approaching
This outstanding AT has rallied sharply in recent days,
moving from an 89.7 cash price on Monday to 93.056 according to
UniCredit's AT1 paper, the riskiest form of bank debt, has
been among the worst performing in 2016 due to investor anxiety
about its capital levels and ability to pay coupons.
Buyers of the new bond are taking a gamble that the cash
call will be successful and resolve these issues, otherwise they
could be left stuck with paper that does not pay any interest.
The largest capital raise ever carried out by an Italian
lender is part of a broader plan, which will see the bank
gradually move 17.7bn of non-performing loans into two
securitisation vehicles set up by fund managers Fortress and
Pimco. UniCredit will retain a minority interest in both
Jean Pierre Mustier, UniCredit's CEO, said the deal, called
Project Fino, would contribute to an 8.1bn provision the bank
is taking to reduce its non-performing loan book.
UniCredit is having to write off 300bp of common equity Tier
1 as a result of the NPLs provisions and the transaction will
help plug some of the capital gap created by the provisioning.
UBS and UniCredit were joint-bookrunners on the 9.25%
perpetual non-call June 2022 deal which is expected to be rated
BB- by Fitch.
(Reporting by Helene Durand, editing by Alex Chambers and