April 23, 2013 / 2:51 PM / 5 years ago

UPDATE 1-UniCredit times Tier 2 bond with peripheral rally

By Aimee Donnellan

LONDON, April 23 (IFR) - Italy’s UniCredit, rated Baa2/BBB+/BBB+, announced plans to sell a US dollar denominated Tier 2 subordinated bond on Tuesday as it seeks to capitalise on a peripheral rally that has driven the country’s borrowing costs to fresh 2013 lows.

This will be the issuer’s first benchmark subordinated bond since October of last year when it sold EUR1.25bn of 10-year debt at mid-swaps plus 510bp on the back of EUR4bn of orders - the first eurozone peripheral bank to issue subordinated debt in over a year.

It subsequently tapped that bond for a further EUR250m in December.

The new Reg S bond, which will have a one time call in five years’ time, could price as soon as Wednesday, one of the banks leading the deal said. BNP Paribas, Citi and UniCredit are managing the process.

UniCredit has no outstanding dollar subordinated debt, according to Tradeweb, and is likely to be looking to take advantage of the deep pockets of Asian retail investors that have proven receptive to European issuers that provide higher yield in this low rate environment.

The opportunistic trade coincides with a strong rally in 10-year Italian government yields after President Giorgio Napolitano gained a second term and reduced the likelihood of another election in the country this summer.

Italian 10-year yields fell to 3.93% on Tuesday, the first time they have broken below 4% since September 2010, having reached 4.95% following the country’s election stalemate at the end of February and the subsequent Cyprus fiasco.

Irish and Spanish 10-year yields also fell sharply. 10-year Spanish yields ground tighter to 4.23%, breaking the 4.25% level last seen in October 2010, while similar debt in Ireland was at a record low of 3.5%. Portuguese equivalents were at 5.70%, also a level last seen back in the autumn of 2010.

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