June 13, 2019 / 5:51 PM / 3 days ago

Foreign investors take up 55% of UBI senior non-preferred bond

FIOLE PHOTO: UBI Banca Popolare Commercio & Industria logo is seen in Milan, Italy, February 28, 2016. REUTERS/Stefano Rellandini

MILAN (Reuters) - Foreign investors have taken up 55% of a 500 million euro (£445 million) “senior non-preferred” (SNP) bond issued on Thursday by Italy’s fifth-biggest lender UBI Banca.

SNP bonds rank below senior bonds in the event of a default and banks use them to comply with regulatory requirements on debt that can be wiped out to absorb potential losses.

UBI had launched its first SNP bond in April last year before a new anti-establishment Italian government clashed with the European Commission over budget plans.

This pushed up financing costs for Italian issuers and effectively shut its lenders out of international debt markets.

UBI’s issue is the first benchmark-sized bond from an Italian bank in the past two months.

A hunt for returns after the European Central Bank last week pushed back the timing of any potential rate hike to the second half of 2020, coupled with Rome’s efforts to avoid a fresh row with Brussels over public finances, have fed demand for higher-yielding Italian paper.

Italy’s Treasury on Wednesday sold 6 billion euros of a new 20-year bond and, on Thursday ,it went on to meet the top of its planned issue range at a bond auction, paying the lowest 7- and 15-year yields in a year.

UBI said in a statement that French investors bought 17% of the issue, followed by buyers in Britain and Ireland who took up a combined 14% share.

Nordic investors took 8% of the issue, while German buyers accounted for 5% and investors in Spain and Portugal a combined 5%, UBI said.

Reporting by Andrea Mandalà; Editing by Alexander Smith

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