August 6, 2018 / 8:06 AM / 3 months ago

UniCredit seeks damages from Caius over CASHES inquiry

MILAN, LONDON (Reuters) - UniCredit (CRDI.MI) is seeking damages of around 90 million euros (£80.28 million) from Caius Capital over the British hedge fund’s action in recent months regarding a complex debt instrument used by the Italian bank.

FILE PHOTO: Unicredit bank logo is seen on a banner downtown Milan, Italy, May 23, 2016. REUTERS/Stefano Rellandini/File Photo

London-based Caius in May asked the European Banking Authority (EBA) to investigate the 2.98 billion euro convertible and subordinated hybrid equity-linked securities, known as CASHES, which UniCredit issued in 2008.

“UniCredit has filed a complaint against Caius Capital and the Caius funds in the Court of Milan seeking compensation of damages in the amount of approximately 90 million euros,” UniCredit said in a statement, adding it would not comment on ongoing proceedings.

A spokesman for Caius declined to comment.

Caius has disclosed it had a trading position in UniCredit without giving details. The Financial Times, which first reported Caius’s letter to the EBA, said the hedge fund had taken a bet against the CASHES.

The hedge fund had said the securities were misclassified as Common Equity Tier (CET) 1, or the best-quality capital held by a bank and a key measure of its financial strength.

Caius believes UniCredit, Italy’s biggest bank by assets, should convert the transaction into shares, which would increase the bank’s CET 1 ratio, but cause big losses for holders of the CASHES.

However, the EBA said last month that there was no clear evidence of a breach of Union law and that it had decided not to open a formal investigation.

On July 26, Caius said it was not taking further legal or regulatory action currently regarding the CASHES as the EBA continues ongoing monitoring of instruments.

UniCredit shares were up 0.1 percent at 0935 GMT, compared with a 0.2 percent fall in Milan’s banking index .FTIT8300.

Reporting by Agnieszka Flak in Milan and Maiya Keidan in London; Editing by Kirsten Donovan

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