UBS finances most of its asset sale to Blackrock

By Thomas Atkins

ZURICH (Reuters) - UBS AG provided 75 percent of the funding used by U.S. asset manager Blackrock to buy a $15 billion (7.63 billion pounds) portfolio of distressed U.S. real estate assets from UBS, the bank said on Wednesday.

UBS provided $11.25 billion in loans to Blackrock, the Swiss-based bank said in a statement. Blackrock raised $3.75 billion in equity from investors to pay for the rest of the package, UBS said.

Investors have welcomed the deal as a way for the troubled wealth manager, the world's largest, to prune its balance sheet and shed the type of assets that made it Europe's biggest casualty of the subprime crisis.

But by UBS lending most of the money to Blackrock in order for Blackrock to buy assets from UBS, UBS remains exposed to some of the risk represented by the distressed assets.

"It's positive for the company but what it means for the shares we'll have to see because the market is quite weak," said senior analyst Rainer Skierka at bank Sarasin.

"It makes absolute sense because it means they are getting the problems out of their balance sheet," Skierka said. "They might have a certain exposure anyway but ... the construction of the deal is such that they will be able participate from any gains in the value of the assets."

UBS said earlier in May that the structure of the deal would give it some exposure to potential upside should the value of the assets rise.

UBS shares were indicated near flat in pre-market data provided by bank ClaridenLeu.