Abu Dhabi’s Aabar Investments could raise up to 2 billion euros ($2.2 billion) by launching bonds exchangeable into shares of Italian bank UniCredit, to raise funds and help buy back a Daimler exchangeable bond.
Aabar, which owns just over five per cent of UniCredit, said in a statement it would sell two tranches of bonds worth 750 million euros each, with an option to increase that amount by a further 250 million per tranche.
At the same time it said it would repurchase a previous 2016 bond exchangeable into shares of the German car maker.
Aabar said it had entered derivatives deals in relation to the 2016 bond, some of which were still in place and would be partially or fully ended in parallel with the buyback.
This would result into Daimler shares being sold by the derivatives counterparties, possibly significantly boosting trading volumes in the stock.
“Aabar remains fully committed to its long-term investment in UniCredit as underscored by the company’s preference to settle the bonds in cash,” the fund said in a statement.
Aabar, which first bought into UniCredit in 2010 and is the single largest shareholder in Italy’s biggest bank by assets, is a subsidiary of the United Arab Emirates’ sovereign wealth fund and is run by the Abu Dhabi government.
On Monday a source familiar with the matter said Aabar had been preparing a bond exchangeable into UniCredit shares.
Aabar said the proceeds of the offering would be used for general corporate purposes including the repurchase of the Daimler bonds.
“We are taking advantage of the current aggressive equity-linked market conditions to put in place an attractive long-term financing for Aabar,” the chairman of the fund Khadem Abdullah Al-Qubaisi said.
Deutsche Bank is sole global coordinator on the deal and is also joint lead arranger with BofA Merrill Lynch and BNP Paribas.