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REFILE-UPDATE 1-UniCredit plans Italy's first Additional Tier 1 bond -sources
March 10, 2014 / 5:25 PM / 4 years ago

REFILE-UPDATE 1-UniCredit plans Italy's first Additional Tier 1 bond -sources

(Clarifies in that the lender is expected to issue the securities in paragraph 2)

By Helene Durand and Silvia Aloisi

LONDON, March 10 (IFR) - UniCredit is expected to announce plans on Tuesday to raise the equivalent of 2 billion in Additional Tier 1 bonds, becoming the first Italian bank to use these risky bonds to boost its capital base.

According to bankers close to the deal, the Italian lender is expected to be looking to issue the securities in the US dollar market and will make the announcement as part of its results. .

Italy’s biggest bank by assets, is expected to book at least 4 billion of write-downs on bad debts in the fourth quarter when it announces 2013 results on Tuesday, in an effort to clean up its balance sheet ahead of the Europe-wide health check of banks.

Like other Italian lenders, UniCredit has struggled to keep a lid on rising bad loans as Italy slowly emerges from its longest recession since World War Two. Bad loans for all of Italy’s banks totalled 160 billion in January, the Bank of Italy said on Monday.

UniCredit joins Banco Santander, Nationwide Building Society and Danske Bank in making the most of investors’ current strong appetite for these securities.

According to a source, unlike issuance from the Spanish banks, which convert into equity if the bank breaches a 5.125% Common Equity Tier 1 ratio, UniCredit will have a temporary write-down mechanism, which means that investors could see their holdings recover, if the bank gets back on its feet.

Citigroup, HSBC and Societe Generale are among the banks that are said to be mandated for the trade, although sources believe other investment banks will also be managing. UniCredit and the banks declined to comment. (Reporting by Helene Durand and Silvia Aloisi, in Milan; editing by Alex Chambers and Louise Heavens)

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