LONDON: Italian banks' subordinated debt took a hit on Tuesday as the after-effects of the failed Vicenza IPO started to filter through to the debt markets.
A 200m 9.5% 2025 Tier 2 bullet from Banca Popolare di Vicenza has lost over three points since the end of last week and was quoted at a 92.56 cash price on Tuesday, according to Eikon.
A 200m 9.5% Tier 2 2025 deal callable in 2020 from Veneto Banca has not fared much better, dropping from 92.8 at the open to 90.1 by lunchtime.
Popolare di Vicenza's 1.5bn share issue failed to gain traction with private investors buying only 7.7% of the shares, leaving Atlante, Italy's bank rescue fund, to purchase the remainder.
"This is a bit scary," said a syndicate banker.
"This fund was created to deal with Italy's non-performing loan problem. However, with what they've spent on Vicenza and what they will probably have to spend on Veneto, there won't be much left to deal with NPLs."
The Atlante fund raised 4.25bn from Italy's leading financial institutions, at the lower end of the 4bn-6bn range initially targeted. More than one third of the fund's resources will now be tied up in a single bank.
Veneto Banca is due to launch a 1bn float following its AGM on May 5. While prices have taken a turn for the worse, they are still far from the dark days of February when paper traded into the high 50s.
The creation of the fund proved a boon for second tier lenders, and last week UBI Banca managed to price a 750m 4.25% 10-year non-call five on books of 1.3bn. That deal was quoted at 99.94, down from its par reoffer price.
"I am a bit nervous about the impact Vicenza'a failure will have on Italian banks to do deals in the market," the banker added. "So many guys have been burnt buying bank recovery stories too prematurely and the Atlante fund doesn't really solve anything. It's recapitalised a weak bank but weakened the stronger banks." A 7% Additional Tier 1 for Intesa SanPaolo is trading at 95.79 versus 96.56 on April 29, according to Eikon.
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