Reuters: Bankruptcy News: UniCredit boosts Tier 2 capital, but holds off on AT1

Reuters: Bankruptcy News Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

Thousands of Free eBooks BookBub brings you free & bargain national bestselling eBooks in the genres of your choice! Sign up now & join 1.5 million happy readers. From our sponsors

UniCredit boosts Tier 2 capital, but holds off on AT1 Oct 24th 2013, 13:20 Share this Email Print Reprints Thu Oct 24, 2013 9:20am EDT * Italian lender capitalises on optimum selling conditions * Lack of tax clarity blocks Additional Tier 1 path By Aimee Donnellan LONDON, Oct 24 (IFR) - UniCredit pre-funded some of its 2014 capital redemptions this week, ahead of what could be a rocky year as the AQR and stress tests loom, but is holding off from issuing Additional Tier 1 until greater clarity on its tax treatment emerges. UniCredit sold a EUR1bn 12 non-call seven-year Tier 2 deal with a 5.75% coupon on Monday, adding to a string of Italian deals that have been sold by the country's banks in recent weeks. For UniCredit, the market conditions and timing were perfect. Since the end of September, the iTraxx subordinated index has tightened by almost 40bp, from 213bp to 177bp, and UniCredit's subordinated spreads have improved by 60bp in the same period. "It seemed like an ideal time to issue a capital bond," said Waleed El-Amir, senior vice-president of UniCredit's strategic funding and investments business. "We did not have need to issue again before the end of the year but we decided to do pre-funding as the market was strong and the spread was attractive." UniCredit has EUR876m of subordinated debt that is set to mature in 2014, so locking in Tier 2 capital ahead of a potentially volatile year is being viewed as a shrewd approach to its capital management. In the wake of the deal, syndicate bankers are encouraging the national champion to take the plunge and issue the country's first Additional Tier 1 bond to comply with new regulations, but UniCredit is unwilling to blaze this trail. "Everyone is talking about Additional Tier 1 at the moment but there are still too many unknowns, not least the tax treatment, for us to consider accessing this market," said El-Amir. Apart from the UK and Spain, European banks have yet to get clarity on the tax treatment of Additional Tier 1 instruments and whether they will be tax-deductible. EURO CALL For this reason, UniCredit, like many European issuers, has focused its capital-raising efforts on Tier 2 issuance this year, selling SGD300m of 10.5 non-call 5.5-year bonds in Singapore dollars in January this year, as well as a USD750m 10 non-call five-year issue in April. Market participants were pleased to see a peripheral bank finally able to sell a callable Tier 2 after the reopening of the market by stronger banks in September/October. Peripheral issuers have only been able to sell bullet structures in the euro market in recent years, which are less efficient from a regulatory capital perspective but favoured by investors who have not wanted to risk an issuer not calling at the earliest opportunity. "Doing a callable is less of an issue for a bank like UniCredit, unlike other peripheral banks that have a more chequered history when it comes to calling bond deals," said a banker not on the deal. And, according to El-Amir, the favourable market backdrop meant that UniCredit only ended up paying a modest premium of around 10bp for the callable structure. "(This) gives us the benefit of a more efficient regulatory amortisation profile. The bond also priced a point through where we issued a bullet structure last year, which shows just how far the market has come," he said. Last October, UniCredit priced a EUR1.25bn 10-year bullet at mid-swaps plus 510bp and offered investors a 6.95% coupon. This time around, despite the more aggressive pricing, there was certainly demand for the deal as European investors placed more than EUR3.5bn of orders, allowing the bond to print at 410bp over mid-swaps, 15bp tighter than where bankers initially marketed the bond. UniCredit's Reg S transaction is expected to be rated Ba1/BBB-/BBB and will have a one-time call at the issuer's discretion, subject to regulatory approval. If not called, the coupon will reset to five-year mid-swaps plus the initial credit spread. Commerzbank, Goldman Sachs, Morgan Stanley, RBS and UniCredit were lead managers on the deal. (Reporting by Aimee Donnellan; Editing by Helene Durand and Philip Wright) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions