Mediobanca Joins Italian Banks Selling Covered Bonds on RatingsAlastair Marsh
Mediobanca SpA hired banks to arrange its first covered bond issue to investors, becoming the fourth Italian lender to announce sales of the debt this month.
The nation’s biggest publicly traded investment bank will meet with investors starting Sept. 30, according to a person familiar with the offering, who asked not to be identified because the terms aren’t set. Modena, Italy-based Banca Popolare dell’Emilia Romagna Scrl hired banks for meetings starting tomorrow and a bond sale may follow, another person familiar with the matter said.
Italian issuers are favoring covered notes, which are backed by mortgages and public sector loans and typically have higher credit rankings, amid downgrades of their senior unsecured debt. Mediobanca was cut one step to BBB by Standard & Poor’s in July, while the ratings firm lowered Banca Popolare Emilia to BB- in August.
“We are seeing a run to covered bonds from Italian issuers because they fear downgrades of their senior debt and feel more protected in covered bonds,” said Jose Sarafana, a credit salesman at Aurel Bgc in Paris. “We are also seeing a switch among Italian investors towards covered bonds.”
Mediobanca mandated Barclays Plc, Societe Generale SA, UniCredit SpA and its own dealing department for a deal backed by prime Italian residential mortgages. SocGen and Mediobanca will also arrange Banca Popolare Emilia’s transaction, together with Citigroup Inc., Royal Bank of Scotland Group Plc and UBS AG.
A Mediobanca spokesman, who asked not to be named citing company policy, declined to comment on the bank’s plans. The lender previously issued a 1.5 billion-euro ($2 billion) covered bond for the European Central Bank’s Longer Term Refinancing Operations, according to its website.
S&P downgraded 18 Italian banks in July, including Banco Popolare SC and Unione di Banche Italiane SCPA, citing rising economic risk. Moody’s Investors Service placed Unione di Banche on review for downgrade on Sept 20., citing weakening profitability and asset quality.
Covered bond issuance has slowed this year to the least since the same period of 2001 as lenders trim balance sheets and central banks flood the financial system with cheap funds. The market in Europe will end the year with negative net supply of more than 50 billion euros after taking into account redemptions, according to Deutsche Bank AG.