Abu Dhabi's Aabar Investments has purchased ?49.8 million (Dh230.3m) of convertible bonds in UniCredit, the Italian lender, as European banks seek capital to cope with the financial crisis. The move comes as the financial meltdown in many banks in central and eastern Europe is creating opportunities for Gulf investors, say analysts. UniCredit is the biggest lender in central and eastern Europe and its shares have fallen to 12-year lows partly due to investor concerns about its exposure to the region's problems. The bank gets about a quarter of its revenues from eastern and central Europe, and a spokesman said yesterday it had no concerns about its operations in the region. "With excess liquidity, now is a good time for those with cash to buy whatever they want cheaply, which may include opportunities [in eastern Europe]," said Yazan Abdeen, a fund manager at ING Investment Management. Last week, three international lenders including the World Bank, the European Bank for Reconstruction and Development, and the European Investment Bank announced loans of up to ?24.5bn for eastern European banks. However, measures by the EU to shore up banks in the area are insufficient, say industry officials. "We are probably going to see more difficulties coming along the road in Poland, Hungary and the Czech Republic perhaps," said Fredrik Erixon, the director of the European Centre for International Political Economy in Brussels, according to Bloomberg. "The scope and magnitude is going to be so big that current instruments aren't going to suffice." This presents an opportunity for Gulf investors with available cash, say analysts. "This is a good time to hunt for bargains and those with cash have the upper hand," said Eric Swats, a partner at Rasmala Investments. The convertible bond, exchangeable into ordinary shares of Italy's second-largest bank by market value, would pay a quarterly coupon equal to the three-month euro interbank rate plus 4.5 per cent interest per year, Aabar said in a statement posted on its website. Aabar is controlled by the International Petroleum Investment Company (IPIC). The government-focused sovereign wealth fund owns a 36 per cent stake in Aabar and has the option to swap bonds for shares to take majority ownership. Last month, IPIC launched a US$500m (Dh1.83 billion) takeover bid for Canada's Nova Chemicals. Analysts are viewing the move by Aabar to invest in UniCredit as part of an overall scheme to diversify holdings geographically and across varied sectors. "Most of these groups will be open to investments locally as well as internationally; it depends on their perceptions of where opportunities exist," said Mr Swats. Khadem al Qubaisi, the managing director at IPIC, has described Aabar as a vehicle for IPIC to diversify its portfolio away from the energy sector. Analysts concede the firm's decision to invest in banks abroad, rather than regional entities, suggests that the firm is finding good investment opportunities in areas such as eastern Europe, where capital is being sought to shore up the region's economies. "[Aabar's] concern is more about returns at the end of the day," said Mr Abdeen. Aabar stated that the securities, which mature on Dec 15 2050, carried an initial exchange price of ?3.083. Analysts are waiting for information on further terms of the bond to be made public, such as the underlying assets that back it, before analysing Aabar's strategy. "We need to know more about the terms [of the convertible bond]," said Mr Abdeen. "[Aabar] has no track record in financial mergers and acquisitions for us to benchmark their valuation process." The convertible bond issue is part of an effort by UniCredit to boost its capital by ?6.6bn. UniCredit representatives declined to comment further on capital-raising plans when contacted. Italy approved a scheme last month to bolster banks' capital through bonds in a crisis-fighting measure expected to involve up to ?12bn. Under the plan, banks would issue bonds that the government would buy and use the proceeds to shore up their capital. * with Reuters and Bloomberg email@example.com
- Kuwaiti investment firm A’ayan and its counterparts go back to basics
- Three of the best no-hassle UAE salary transfer bank accounts
- Second landmark for Saudi women as Al Suhaimi takes top banking post
- UAB scores a winner with Barcelona club partnership
- Abu Dhabi Global Market in talks with ‘global giants’
- In pictures: Day one of Global Financial Markets Forum 2014 in Abu Dhabi
- Most Viewed
- Most Commented
- Emirates Airline and Qatar Airways defend cabin crew rules
- Dh1bn Palm Jumeirah resort aims to bring Miami’s glamour and jet-set lifestyle to Dubai
- Qatar faces Fifa World Cup 2022 cost and labour risks, IMF says
- BlackBerry pins hope on Qwerty as sales in UAE pick up
- Will I be sent to jail if my cheque bounces in the UAE?
- Most Viewed
- Most Commented
- Federal Traffic Council approves proposal to lower UAE driving age
- Men ripped off woman’s clothes in bathroom, Abu Dhabi court hears
- Ties no longer mandatory for Dubai cabbies amid safety concerns
- OSN blames rival for TV sport blackout in the UAE as fans will have to buy new set-top boxes
- Live blog: With the emergency workers at Rashid Hospital Trauma Centre
In pictures: Top 10 most popular mobile handsets in the UAE
Here are the top 10 mobile handets in the UAE by specific model for the fourth quarter of 2013, according to the Telecommunications Regulation Authority.
China in pictures: The desolation of smog
China will tighten environmental legislation and force polluters to pay compensation following renewed blasts of toxic air.
In pictures: CeBIT 2014
German chancellor Angela Merkel and Apple co-founder Steve Wozniak were scheduled to headline the opening ceremony of CeBIT 2014, which is expected to focus on security in the post-Snowden era.
In pictures: Equality for women is progress for all
The International Women's Day, which celebrates women's rights across the globe, was celebrated on March 8 with the United Nations pushing across the message that "equality for women is progress for all".
Abu Dhabi and Dubai among world’s fast growing premium property markets
Knight Frank says improved economic indicators and a more stable property market helped Abu Dhabi and Dubai to rise in the company's rankings.
Rates report: Latest on UAE loans, accounts and credit cards
Souqamal.com brings you the latest interest rates on banking products in the UAE.