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UniCredit’s Asset-Backed Securities Buyback to Boost Capital

UniCredit SpA offered to pay as much as 1 billion euros ($1.3 billion) to buy back asset-backed securities in the first deal of its kind by an Italian bank in more than two years.

Investors have until Sept. 24 to accept a cash offer equating to 37 percent to 96 percent of the 6 billion-euro face value of 22 securities, the Milan-based lender said in a statement yesterday. If acceptances exceed the offer, holders will be treated on a pro-rata basis, Italy’s biggest bank said.

Banks in peripheral European countries, including Spain’s Banco Bilbao Vizcaya Argentaria SA and Portugal’s Banco Comercial Portugues SA, repurchased about 11 billion euros of asset-backed bonds this year, according to Barclays Plc. Buying back the loans for less than face value allows UniCredit and other lenders to book capital gains similar to the discount.

“We can imagine similar deals for other strong banks out of Italy and the other peripheral countries,” said Dalibor Jarnevic, an asset backed securities trader at DZ Bank AG in Frankfurt.

UniCredit Chief Executive Officer Federico Ghizzoni is reducing risk and cutting costs as part of the bank’s five-year plan to restore profit. The bank posted a capital gain of 477 million euros after buying back 3 billion euros of Tier 1 and Tier 2 bonds in January.

“UniCredit has a strategic goal to optimize its balance sheet structure by offering investors the possibility to tender such securities in exchange for cash,” the bank said.

Unicredit repurchased asset backed securities with a face value of 2.1 billion euros in February 2010, the last such buyback by an Italian lender, according JPMorgan Chase & Co.

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