Euro break-up cited as risk in UniCredit prospectus

MILAN Jan 5 (Reuters) - UniCredit, Italy's largest bank by assets, has cited the break-up of the euro zone and the collapse of the single currency as risk factors in the prospectus of its 7.5 billion euro rights issue.

The 463-page document, published on UniCredit's website after it priced the rights issue at a steep discount on Wednesday, cites a number of risks for investors willing to underwrite the offer.

UniCredit's shares have lost nearly 30 percent of their vlaue since details of the offer, a litmus test of market appetite for banking stocks, were announced.

"Concerns that the euro zone sovereign debt crisis could worsen may lead to the reintroduction of national currencies in one or more euro zone countries or, in particularly dire circumstances, the abandonment of the euro," it says, adding this would have a significant negative impact on the group.

It also says that any deterioration of the political and socioeconomic situation in Greece, as well as a decision by UniCredit to participate in restructuring plans for Greek debt -- including extension of maturities or the reduction of bonds' redemption value to their par value -- could result "in even bigger losses" for UniCredit than those recorded on 30 September 2011.

The bank posted a 10.6 billion euro loss for the third quarter in September due to big writedowns.

UniCredit, which like other Italian banks has been effectively shut out of the wholesale debt market and has had to increase its reliance on the European Central Bank for funding, also said any "unfavourable changes" to the ECB lending policies could have major negative effects on its operating results as well as its capital and financial position.

Among other risk factors, it cited "any decision by the ECB to suspend or revise the terms that apply to buying back the sovereign debt of certain European countries," it said, in a reference to ECB purchases of Italian and Spanish bonds to keep a lid on soaring yields.

The prospectus confirmed that UniCredit holds 38.8 billion euros of Italian government debt securities, accounting for 43 percent of its sovereign debt exposure. (Reporting By Silvia Aloisi and Antonella Ciancio; Editing by David Cowell)