UniCredit goes live with Tier 2 bond amid peripheral rally
* Books for UniCredit Tier 2 subordinated bond top USD2bn
* Guidance tightened to 6.5%
By Aimee Donnellan
LONDON, April 24 (IFR) - Italy's UniCredit, rated Baa2/BBB+/BBB+, has opened books on a US dollar-denominated Tier 2 bond, its first subordinated benchmark issue in six months, as it seeks to capitalise on a widespread peripheral rally.
The new Reg S deal, with expected ratings of Baa3/BBB/BBB, was announced late on Tuesday. Bookrunners BNP Paribas, Citi and UniCredit set price talk on Wednesday morning at 6.625% area and later tightened that to 6.5% area as books grew to more than USD2bn.
Books are expected to go subject at short notice, with pricing later today.
The bond will have a one time call in five years, and coupons will reset with no step-up if that call is not exercised.
Bankers close to the deal said it was difficult to estimate an accurate new issue premium mainly because the issuer's last deal was not only in euros but also had a bullet structure.
"We calculated the relative value between euro and dollars for UniCredit because it doesn't have a 10NC5-year that would be a relevant marker," said a syndicate banker.
As pricing references, the leads looked to UniCredit's last subordinated bond issue - a EUR1.25bn 10-year bullet transaction which priced in October and was tapped by EUR250m in December - as well as to other outstanding Tier 2 euro and dollar paper.
The 6.95% October 2022 bond, which printed at mid-swaps plus 510bp on the back of EUR4bn of orders, was bid at mid-swaps plus 466bp on Wednesday morning.
UniCredit's 6% 2017 US dollar Tier 2 bond, meanwhile, was bid at mid-swaps plus 450bp on the bid side pre-announcement.
ABN AMRO's 6.25% USD1.5bn 10NC5 transaction was also referenced, another banker on the deal said. That 2022 bond was bid at mid-swaps plus 342bp on Wednesday morning, having priced at 545bp over mid-swaps in September last year.
TIMED TO PERFECTION
UniCredit has a relatively strong track record in opportunistic deals. Its October issue was the first eurozone peripheral bank subordinated bond to price in over a year.
With its latest issue, UniCredit is likely to attract demand from Asian retail investors that have proven receptive to European issuers that provide higher yield in this low rate environment.
The deal also coincides with a strong rally in 10-year Italian government yields after President Giorgio Napolitano gained a second term which reduced the likelihood of another election in the country this summer.
Italian 10-year yields fell to 3.93% at one point on Tuesday - the first time they have broken below 4% since September 2010. Those yields were at 4.95% following the country's election stalemate at the end of February and the subsequent Cyprus fiasco.
Irish and Spanish 10-years also rallied sharply on Tuesday, although yields are off their lows in Wednesday trading.
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