Aabar, the Abu Dhabi investor, owns a 6.5% stake in UniCredit and is its biggest shareholder

Bloomberg/London


Aabar Investments is seeking to raise at least €1bn ($1.1bn) by selling bonds that can be exchanged for shares in UniCredit, and may double the deal size if there is demand, people with knowledge of the matter said.
Aabar, the Abu Dhabi investor which owns a 6.5% stake in UniCredit and is its biggest shareholder according to the website of Italian securities watchdog Consob, may announce the transaction as early as this week, the people said, all of whom asked not to be identified because the details are private. They declined to comment on the bonds’ terms.
Shares in UniCredit fell as much as 1.3% and were 0.6% lower at 6.26 euros at 11:10am in Milan.
Aabar’s stake in UniCredit is valued at about €2.4bn at current market prices. Since Aabar first invested in the bank in June 2010, shares have dropped more than 40%.
Deutsche Bank, Bank of America Corp, BNP Paribas and Societe Generale are among banks advising on the transaction, which may cut Aabar’s stake in the Italian lender, they said. The bonds may be sold in two tranches, two of the people said.
UniCredit is among European lenders that posted a drop in its common equity ratio, a key indicator of financial strength, when it reported earnings last month. Italy’s biggest bank blamed the fall on the rouble’s decline.
A spokesman for Aabar didn’t immediately comment. Representatives for Unicredit, BNP Paribas, Deutsche Bank, Societe Generale and Bank of America declined to comment.
Aabar acquired a 4.99% stake in Italy’s largest lender in 2010, rising to 6.5% after a 2012 rights issue. It used derivative transactions known as collar trades to finance the deal, according to the financial statements of Aabar’s parent, International Petroleum Investment Co.
This isn’t the first time Aabar has raised funds by selling exchangeable bonds. In May 2011 it raised €1.25bn by selling notes for shares of German car maker Daimler.
Aabar is working with other Italian shareholders to propose a single list of board members for the bank at an investor meeting in May, Corriere della Sera reported March 14, citing UniCredit Deputy Chairman Luca Cordero Di Montezemolo.
UniCredit’s common equity Tier 1 ratio fell to 10.4% at the end of December from 10.8% three months earlier. The lender on February 11 reported net income of €170mn, compared with a net loss of €15bn a year ago.