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[LONDON] UBS Group AG is set to reopen the battered European Additional Tier 1 market as early as Monday, having mandated its own investment bank for a US dollar issue.
The market for Additional Tier 1 instruments has been shut since mid-January, after severe volatility and global macro headwinds buffeted the asset class. Concerns around banks' ability to pay coupons on the debt were also at the heart of investors' worries.
However, the Swiss lender is hoping to capitalise on appetite for riskier assets after the European Central Bank stepped up its stimulus last Thursday.
Riskier bonds have rallied since then, including USB's own Additional Tier 1 debt. A 5.75 per cent euro transaction was bid at a yield of 5.047 per cent on Monday, down from the 7.4 per cent peak it hit in the middle of February.
Bank of America Merrill Lynch's CoCo index has also recovered and was quoted at a yield of 6.26 per cent according to Eikon, down from 7.25 per cent in mid February.
The Swiss lender's investment bank will lead manage the transaction, which will be denominated in US dollars and is being marketed at 7 per cent to 7.125 per cent.
Under the terms of the deal, bonds will be written down if the bank's Common Equity Tier 1 ratio falls below 7 per cent.
The perpetual non-call five-year issue will be in Reg S format.