Abu Dhabi fund Aabar Investments said on Thursday its sale of 2 billion euros ($2.2 billion) of bonds exchangeable into shares of UniCredit was not an exit from its investment in the Italian bank, but a way to improve its own finances.
Aabar chairman Khadem al-Qubaisi told Reuters it may issue similar bonds linked to shares in other investments in future, although it currently had no plans to do so.
The investment firm on Tuesday said it had sold the five- and seven-year bonds representing around four per cent of UniCredit’s issued and outstanding shares, announcing the 8.8642 euros exchange price on the bonds a day later..
UniCredit shares were trading at 6.165 euros at 1515 GMT.
The UniCredit bonds can be repaid in either shares or cash and Aabar has control on how to settle the bond, Qubaisi said in emailed responses to questions from Reuters.
Although the bonds are called exchangeable, the option occurs only in the final six months of the lifespan, which restricts the ability of investors to swap them for equity, Aabar said in an additional statement.
“Consequently, this should not be seen as an exit, but instead as a pure financing tool with UniCredit,” Qubaisi told Reuters.
Proceeds from the bond will be used to cancel a separate exchangeable bond Aabar sold in 2011 backed by shares in Daimler , with surplus funds deployed to reduce financing costs or enhance assets, Qubaisi said without elaborating.
The difference in interest rate between the UniCredit and Daimler exchangeable bonds would save Aabar paying an extra 3.25 percent on its borrowing, the separate statement said.
Asked if Aabar planned a similar exchangeable bond on any of its other investments, Qubaisi said it monitored all opportunities and markets for the best financing strategies.
Aabar, majority-owned by Abu Dhabi’s International Petroleum Investment Company (IPIC), manages a portfolio of investments spanning real estate to aerospace and financial services to energy, including a 37.8 per cent stake in Virgin Galactic.