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UniCredit defies coupon fury with popular $ 2 billion bonds

(Bloomberg) – UniCredit SpA completed a $ 2 billion bond sale that sparked strong demand, helping the Italian lender out of this week’s fury over a missed coupon payment. attracting over $ 8 billion in demand from about 200 investors, the majority from North America. The strong order book helped the bank reduce the initial offered spread by 25 basis points. The bonds sold on Wednesday were in a senior preferred format, making them less risky than the complex and deeply subordinated CASHES bonds. The deal shows that investors were prepared to look beyond UniCredit’s decision not to pay the coupon on so-called CASHES bonds and the resulting confusion over an accidental transfer of certain funds by Euroclear. “The bank could have taken a friendlier approach, but it didn’t do anything wrong,” said Stefano Girola, portfolio manager at Alicanto Capital SGR in Milan, which owns some of the bank’s bonds. . The sale “shows that the CASHES episode did not damage its reputation or change the decisions of investors.” be wiped out if a lender has serious problems. The terms of senior bonds are also much simpler than those of CASHES, short for Convertible and Subordinated Hybrid Equity-Linked Securities, issued in 2009 to strengthen UniCredit’s capital following the financial crisis. investors who expected a coupon payment on the 30 million euros ($ 37 million) on CASHES, UniCredit’s position that it was entitled not to pay on the grounds that the bank had suffered a loss last year was a turnaround. Some investors have said they plan to avoid further debts from UniCredit. Federated Hermes, which owns the CASHES bonds at the center of the dispute, did not even consider participating in the dollar issue, according to Filippo Alloatti , senior credit analyst. A few days after the coupon decision was announced, it emerged that some holders had in fact received a payment notice, which turned out to be a Euroclear error. The firm, specializing in the settlement of securities transactions, is now seeking to cancel the loans. For Orcel, the bond sale adds to the signs that the damages of CASHES may remain limited to the subset of investors who were direct participants. We’re not involved in CASHES, so we don’t really have an ax to grind, ”said Andrew Fraser, head of financial credit research at Aberdeen Standard Investments. “You can certainly argue about poor communication, as well as disrespecting the hierarchy of capital structure by continuing with its planned share buyback, but that doesn’t really change our long-term view of the bank.” (Updates with details about the sale in the second and sixth paragraphs) More stories like this are available at bloomberg.com Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP


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