Italy reserves right to cap upcoming BTP-i sale

Thu Apr 4, 2013 9:55am EDT

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LONDON, April 4 (IFR) - Italy has reserved the right to cap its upcoming sale of retail bonds this month, after its last issue ballooned to EUR18bn with every order filled.

A term sheet published by the Tesoro on Wednesday for its upcoming four-year inflation-linked BTP Italia, set to be on sale between April 15 and 18, included a new clause giving it the right to cut the sale short.

"The early closing may take place not earlier than 5.30pm of the second day of placement (April 16, 2013). In the days following the second day of placement, the early closing will be decided at the MEF [Ministero dell'Economia e delle Finanze], and will take place not before 1.30pm," said the term sheet.

The fact that the Tesoro has put this in the documentation for the first time suggests that the bond will not be allowed to grow as large as the previous BTP-i issued in October last year, said Dr. Luca Cazzulani, deputy head of FI strategy at UniCredit, one of the banks mandated as a dealer for the new sale.

The Tesoro fully allocates all orders placed on BTP-i sales, unlike other syndicated issuance.

Its last BTP-i sale set the record for the largest amount raised in a single debt offering in the European markets, trumping the UK, which issued GBP8bn of 30-year bonds in June 2010, and snatching the eurozone crown from Greece, which sold EUR8bn of bond issues in both 2009 and 2010, according to Thomson Reuters data.

This EUR18bn 2.55% October 2016 was over twice the size of its previous two BTP-i issues, a EUR7.3bn 2.45% March 2016 and a EUR1.7bn 3.55% June 2016.

The new BTP-i will mature on 22 April 2017.

Banca IMI and UniCredit have been selected as dealers for the new deal, with Banca Akros and Banca Sella Holding as co-dealers. A 0.3% fee will be paid to banks on the value of the bids they collect from investors.

The Tesoro will announce the minimum coupon for the new bond on April 12, although the final coupon will be set based on market conditions on the day of closing at a level not less than the guaranteed minimum coupon.

Despite the political uncertainty in Italy, initial expectations are that the bond should attract plenty of demand from domestic retail investors.

"The low level of BOT rates (the 12M trades in the 1% area) should create an incentive for retail investors to look for better-yielding alternatives. In this respect, the new BTP-Italia represents a very good opportunity to improve returns while keeping the price volatility relatively low," said UniCredit.

While these bonds are principally targeted at a domestic audience, around 9% of the last BTP-i bond was sold to international accounts. (Reporting by John Geddie; editing by Philip Wright and Natalie Harrison)

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