UniCredit offers bond buy back in hope to increase efficiency

Italy’s UniCredit has offered to buy back €1.8bn that can no longer be counted towards the bank’s Tier 2 capital.

“The tender offer […] will allow the offeror to optimise the profile of its liabilities, repurchasing the existing notes that no longer qualify as Tier 2 instruments in the own funds of the offeror and are therefore inefficient from a regulatory perspective,” UniCredit’s note reads.

The offering period will begin on 25 January 2016 and end on 16 February 2016.

The move is seen as helping to increase UniCredit’s debt efficiency by getting rid of expensive bonds that will not be required by regulators.

The news follows that of the entire Italian baking system coming under pressure as bad loans hit share prices through the week.

In particular, Banca Monte dei Paschi di Siena (MPS) fell 22% between Monday and Tuesday and the CEO Fabrizio Viola said that savers were withdrawing money from their accounts.

“At the moment the size of the holdings of clients who have decided to move their savings elsewhere is contained and less than that experienced by the bank in 2013,” he said trying to calm investors, the Financial Times reported.

The FT also reported that the FTSE Italia All-Share Banks Index was down 7%, taking its fall for the year to 21%, with other banks like UniCredit and Banca Popolare also seeing lower losses.

Prime Minister Matteo Renzi was also reported to call a meeting with Economy and Finance minister Pier Carlo Padoan and the governor of the Bank of Italy Ignazio Visco to discuss the situation.

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