UPDATE 1-Market Chatter-Corporate finance press digest

Tue Sep 9, 2014 1:57am EDT

(Adds SIS Prosegur and Trump Entertainment Resorts Inc)

Sept 9 (Reuters) - The following corporate finance-related stories were reported by media:

* San Miguel Corp, the Philippines' most diversified conglomerate, has signed a $1 billion deal to sell its stake in Philippine Airlines (PAL) back to the group from which it bought the stake more than two years ago, a person with knowledge of the matter said on Monday.

* Bharti Airtel Ltd has agreed to sell more than 3,500 mobile phone masts in six African nations to telecommunications tower firm Eaton Towers, in a deal sources said could be worth up to $800 million.

* BGC Partners Inc is likely to make a $675 million all-cash unsolicited offer for derivatives broker and rival GFI Group Inc in a bid to bolster its business, the Wall Street Journal reported on Monday citing people familiar with the matter.

* Jimmy Choo Ltd, the luxury shoemaker owned by JAB Holdings, may begin its initial public offering in London as soon as this month amid rising demand for expensive footwear, Bloomberg reported, citing people with knowledge of the situation. (bloom.bg/1okLA7p)

* Cleco, Louisiana's electricity supplier, is nearing a deal to sell itself and has narrowed down the list of prospective buyers to Iberdrola SA, Spain's largest utility, and Australian investment bank Macquarie Group Ltd . Both bidders have discussed terms with Cleco and a deal could be announced within weeks, the Financial Times reported, citing people familiar with the matter. (on.ft.com/1uGIMp2)

* Cash logistics firm SIS Prosegur has acquired the cash management business of Danish major ISS A/S for about 1.5 billion Indian rupees ($24.82 million), the Economic Times reported, citing two people familiar with the matter. (bit.ly/1lOXU3V)

* Trump Entertainment Resorts Inc, which operates two Atlantic City casinos - Trump Taj Mahal Casino Resort and the soon-to-be-closed Trump Plaza Hotel and Casino, is to file for bankruptcy, Bloomberg reported on Monday, citing sources.

For the deals of the day click on

For the Morning News Call-EMEA newsletter click on (1 US dollar = 60.4400 Indian rupee) (Compiled by Rama Venkat Raman in Bangalore)

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Gov. Christie on Atlantic City casinos closures: We have work to do

By Daniel Kelley

ATLANTIC CITY, N.J., Sept 8 Mon Sep 8, 2014 7:03pm EDT

ATLANTIC CITY, N.J., Sept 8 (Reuters) - Governor Chris Christie pushed past a sea of angry protesters on Monday to meet with business leaders and politicians on ways to save troubled Atlantic City, which has lost a quarter of its 12 casinos already this year.

After the closed-door meeting held a week before the expected closure of yet another casino, Christie declined to reveal details of the talks.

"Because I don't want to," he said.

But he would not deny some proposals were discussed, including a proposed casino in the Meadowlands, which would almost certainly siphon business away from Atlantic City, and a major restructuring of Atlantic City government, where the city has seen billions - one councilman says $9 billion - of property tax valuation lost on the tax rolls.

"The fact is, we have work to do," Christie said during opening remarks at the meeting of 30 political and business leaders.

Though CEO's of several major gaming companies were in attendance, one who was invited but notably absent was Trump Entertainment Properties Chief Executive Officer Robert Griffin. The company's Trump Plaza is slated to close Sept. 16 and its Trump Taj Mahal Casino is expected to file bankruptcy, according to Philadelphia's CBS affiliate and the New York Post.

Atlantic City, which once held a lucrative East Coast gambling monopoly, has seen its fortunes fade as nearly 40 casinos have opened in neighboring states. The city's gaming revenue has dropped to $2.8 billion from its 2006 peak of $5.2 billion, according to state gaming regulators.

Christie said the contraction of the gaming market in the face of competition was "inevitable" but that the city still had much to offer.

"It's a $2.5 billion market," Christie said, "and there's still a very active customer base that (gaming companies) would want access to."

Dozens of protesters greeted Christie as he entered the meeting in the offices of the Casino Reinvestment Development Authority (CRDA), an economic development agency that is funded by a tax on casino revenue.

CRDA funds have been used on a variety of projects, including the construction of parking garages, boardwalk improvements, the construction of retail stores, and the purchase of dilapidated homes for demolition.

Protesters want those funds redirected toward property tax relief.

"We want jobs, and we want them to lower the property taxes," said Amy Wu, 51, a dealer at Taj Mahal, who said she pays $8,000 in annual property taxes on her home, which remains damaged by Hurricane Sandy.

The summit occurred on the same day that Christie's acting attorney general issued a directive that allows casinos and racetracks to take bets on sporting events without fear of criminal or civil penalty.

Christie said he agreed with the directive, which came amid an ongoing federal court battle after New Jersey was sued by the NFL and other sports league. (Editing by Barbara Goldberg, Bernard Orr)

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UPDATE 2-Portugal Telecom, Oi shareholders approve new merger terms

Mon Sep 8, 2014 7:21pm EDT

(Recasts to add approval by Oi shareholders, share performance)

By Daniel Alvarenga

LISBON, Sept 8 (Reuters) - Shareholders of Portugal Telecom and Brazil's Oi on Monday approved the revised terms of a merger after a failed debt investment forced the Portuguese company to accept less favorable terms in the tie-up.

At a meeting of Portugal Telecom (PT) shareholders, some 98.25 percent voted in favor of approving the new terms of the deal, according to a company spokeswoman.

"The revision (of the deal) is not an ideal situation, but it is the better option given the circumstances that have been discovered," Paulo Varela, CEO of conglomerate Visabeira, which holds about 2 percent of PT, told reporters.

Shares of Portugal Telecom closed 1.26 percent higher on Monday, amid expectations that shareholders would approve the terms. They have bounced over 30 percent since bottoming out last month in the aftermath of the ill-fated debt investment.

Separately, Oi shareholders also approved the new terms in a general assembly. The company's stock touched a six-week high in Sao Paulo trading as any remaining doubts about the deal dissolved.

In July, executives and key shareholders of both companies had agreed that Portugal Telecom should take a smaller share of the company resulting from the merger with Oi, settling for 25.6 percent rather than the 38 percent stake originally agreed.

The renegotiation came after a holding company of the Espirito Santo banking family defaulted on nearly 900 million euros ($1.2 billion) it owed to the Portuguese firm.

Concerns about the risky investment led the company's CEO Henrique Granadeiro to resign in early August.

Portugal Telecom had failed to inform Oi of the investment and assumed the unpaid debt under the reworked deal in July. PT and Oi combined their operating assets in May.

Some small shareholders have said they were unhappy with the new terms. Octavio Viana, head of investor association ATM representing minority shareholders in Portugal Telecom who are dissatisfied with the deal, said earlier on Monday that his group would advance with legal action if it was approved.

Two dozen shareholders represented by the association last month filed a class-action suit against all Portugal Telecom management teams since 2001 over investments in Espirito Santo group made since then, claiming it was illegal and demanding reimbursement for the lost value of their shares in Portugal Telecom.

But many analysts said that voting in support of the deal was the best option.

"At this point, the way the deal is structured, Portugal Telecom shareholders are better off voting for it, as that will allow them to directly own a stake in the new company," said Allan Nichols, a senior analyst at Morningstar Equity Research.

"It's a lesser of two evils, but PT really shot itself in the foot with that loan."

Portugal Telecom and Oi announced plans to combine in October 2013 in a deal aimed at creating a stronger competitor in the Brazilian telecoms market as well as a cost savings that should help both companies reduce their debt.

Shareholder advisory firms Institutional Shareholder Services and Glass Lewis both recommended Portugal Telecom shareholders approve the reworked deal.

Under the deal, Portugal Telecom has a call option to buy back more shares in Oi over a six-year period, potentially increasing its stake in the merged group if it can recover some of the money from Rioforte, the holding company that defaulted on its debt.

Rioforte, which is registered in Luxembourg, is under creditor protection, with judges expected to rule next month on how and when it can start selling assets that range from the largest piece of private property in Portugal to tourism, energy, healthcare and farming from Brazil to Mozambique.

The collapse of the Espirito Santo family's business empire culminated in the Aug. 3 rescue by Portugal of the country's largest listed lender, Banco Espirito Santo, which was split into a bad bank holding toxic assets and a solvent bank, Novo Banco.

Novo Banco inherited the lender's 10 percent stake in Portugal Telecom and is to vote at the shareholder meeting, where two-thirds of those present have to approve the deal. (U.S. $1 = 0.7724 euro) (Additional reporting by Andrei Khalip, writing by Axel Bugge; editing by G Crosse, Mark Potter)

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UPDATE 1-Detroit needs to shed debt to afford improvements -witness

Fri Sep 5, 2014 5:58pm EDT

(Adds summary of hearing so far, filing of sealed order)

By Karen Pierog

DETROIT, Sept 5 (Reuters) - Detroit could not afford to undertake a series of necessary improvements without a court-approved plan to shed a chunk of its debt, a city consultant testified on Friday at a U.S. Bankruptcy Court hearing.

Charles Moore, a senior managing director at restructuring firm Conway MacKenzie Inc, said the six areas of Detroit's government that have been targeted for $1.7 billion of reinvestment initiatives running through June 30, 2023, were essential for the city to provide adequate levels of services to residents and businesses.

"Without the plan, it's uncertain to me how the reinvestment initiatives can be funded," Moore testified during the fourth day of a hearing to determine whether the city's debt adjustment plan is fair and feasible.

Detroit last year filed the largest municipal bankruptcy in U.S. history. It would shed about $7 billion of its $18 billion of debt and obligations under the plan and the city has reached settlements with most of its major creditors, including pension funds and unions.

Hold-out creditors remain, including Syncora Guarantee Inc and Financial Guaranty Insurance Co, which backed payments on $1.4 billion of pension debt and are facing recoveries of just 10 cents on the dollar or nothing if the city succeeds in voiding the debt all together. Both bond insurers have argued the plan short changes them while allowing fatter recoveries for others, including the city's retired workers.

The city would spend the $1.7 billion to eradicate blighted buildings, improve public safety services, update information technology and address other neglected areas.

Moore said the initiatives are expected to boost city revenue by $483 million and cut costs by $358 million through mid-2023. That would leave about $877 million to be covered by debt reductions and other funding sources in the city's plan.

While the confirmation hearing on the plan is scheduled to last through Oct. 17, its first four days were consumed by opening statements from plan supporters and opponents, leaving time for testimony from only two witnesses: Moore and Detroit Chief Financial Officer John Hill. Moore is due back on the stand on Monday for continued cross examination.

Detroit had submitted a list of 26 witnesses, including Kevyn Orr, Detroit's state-appointed emergency manager, and the city's mayor, Mike Duggan. One of the city's lawyers has said Detroit may not finish laying out its case until the first week in October.

Judge Steven Rhodes, who is overseeing the case, has allocated each side 85 hours to present their cases.

On Friday, a sealed order was filed in the case, meaning its contents were not publicly disclosed. Previous sealed orders dealt with mediation matters and the judge's bus tour of Detroit.

Hill wrapped up his testimony earlier on Friday with questions from the judge. Hill said that while the plan will not be easy to implement, Detroit has to maintain a "crisis mentality" to ensure it continues to move forward.

An oversight commission that would be created for Detroit once it leaves bankruptcy should include business professionals who will not hesitate to act, he added.

"I believe that pressure will help keep things on track."

(Additional reporting by Lisa Lambert in Washington; editing by Matthew Lewis)

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Australia's Western Desert calls administrators as iron ore price plunges

SYDNEY, Sept 8 Sun Sep 7, 2014 7:41pm EDT

SYDNEY, Sept 8 (Reuters) - Australian junior iron ore miner Western Desert Resources Ltd said it had called in administrators after failing to negotiate a deal with its bankers, due largely to plunging iron ore prices.

Western Desert, which started mining at its Roper Bar mine in the Northern Territory last December, said it was suspending its shares and appointing an administrator after Macquarie Bank rejected its funding proposals.

"The recent substantial fall in the iron ore price to a five year historical low, which shows no sign of abating in the short term, when coupled with a strong Australian dollar, has substantially contributed to this outcome," the company said in a statement.

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UPDATE 2-Iron ore price plunge claims first Australian casualty

Mon Sep 8, 2014 1:02am EDT

* Western Desert put into administration amid start-up problems

* Iron ore price slumps 38 pct this year

* Share prices of iron ore miners battered (Adds China August import data, iron ore supply volumes, graphic)

By Sonali Paul

MELBOURNE, Sept 8 (Reuters) - Plunging iron ore prices have dealt their first blow in Australia, sending fledgling miner Western Desert Resources Ltd into administration after it failed to reach a deal with bankers over its debt.

Western Desert was caught out by a move by the world's top four iron ore producers to flood the market with low-cost supply, outpacing Chinese demand growth for the steel-making ingredient and slashing iron ore prices by 38 percent this year.

The Northern Territory-based producer was also hurt by teething problems at its Roper Bar mine, but analysts warned many of Australia's other smaller to medium-sized producers could soon feel the pain of the recent price slump.

"At current prices they can survive. But from here on, if prices go lower, it progressively gets tougher," said Mike Harrowell, director of resources at broker BBY.

UBS estimated that even at present iron ore prices, smaller producers Atlas Iron Ltd, Gindalbie Metals Ltd and Grange Resources are all under water.

Iron ore, which is priced in U.S. dollars, has sunk to a five-year low of $83.60. Australian miners have felt the impact even more as the Australian dollar has risen 5 percent against the U.S. dollar in that time.

Iron ore output from Australia and Brazil, dominated by giants Vale, Rio Tinto , BHP Billiton and Fortescue Metals Group, is forecast to rise 15 percent this year, adding 132 million tonnes.

China imported 8.5 percent more iron ore in August than a year earlier, but imports for the year are expected to grow by only 49 million tonnes, well below the volume of extra supply, according to Australia's official forecaster.

With huge economies of scale, Rio Tinto and BHP can remain profitable even if the delivered price to China slid to $55.

But the glut has spooked investors in other miners, sending shares of world no.4 producer Fortescue down a third this year. Smaller miners like Atlas Iron, BC Iron and Gindalbie have lost more than half their value.

DEBT WOES

Western Desert, which started mining only last December, said on Monday it was suspending its shares and appointing an administrator after Macquarie Bank rejected its funding proposals for paying down A$81 million in debt.

The company had struggled to ramp up output to its target rate of 3 million tonnes a year due to poor ore grades and shipping constraints.

"The recent substantial fall in the iron ore price to a five year historical low, which shows no sign of abating in the short term, when coupled with a strong Australian dollar, has substantially contributed to this outcome," it said in a statement.

"Western Desert is in a unique situation as it was in start-up mode during a time of extreme iron ore softness," said Andrew Shearer, a resources analyst at PAC Partners, which works with broker Phillip Capital.

The weak iron ore price has also raised uncertainty around a bid by BC Iron for Iron Ore Holdings, with one of the conditions on the deal tied to iron ore prices not falling below A$90 a tonne for 20 consecutive days.

That price was breached last Friday and BC Iron could extend the offer deadline beyond September 30, which could give them the option to withdraw if prices stay weak.

"They don't necessarily pull out, but may seek to re-price the merger. They have possibilities," Harrowell said.

BC Iron and its advisers declined to comment on what the company may do, given the sharp drop in iron ore prices.

(Reporting by Sonali Paul; Editing by Richard Pullin)

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Santander upsets CoCo cart as floodgates prepare to open

Fri Sep 5, 2014 8:51am EDT

* Santander ploughs into bond market with 1.5bn CoCo

* UniCredit suffers as Santander struggles in secondary market

* HSBC, Credit Agricole and others line up for capital rush

By Aimee Donnellan

LONDON, Sept 5 (IFR) - Santander's push to be the first in a wave of bank capital issuance across Europe threatened to upset the CoCo market just as it is set to take off, when the seemingly oversized trade struggled to perform post-pricing.

The 1.5bn perpetual non-call seven-year Additional Tier 1 deal attracted over 3bn of demand, a far cry from the 17bn the bank received from 820 investors for its inaugural euro issue back in March.

Up until this summer, banks had been able to dictate pricing terms but heightened international political risk, a sell-off in the asset class over the summer and a bulging pipeline of deals are allowing investors to be choosier.

Santander rushed out its deal ahead of a similar trade from UniCredit, but after taking 1.5bn out of the market on the back of the relatively small order book, the deal failed to perform and was still bid below par on Friday at 99.375.

The two issuers announced their intentions of selling AT1s on the same day but Santander was able to pull the trigger faster as it had already tapped the euro market, unlike UniCredit which had only raised AT1 debt in US dollars.

"Santander was ready to go for some time so it was really just coincidental that it came at the same time as UniCredit," said a banker on the trade. The deal was led by Credit Suisse, HSBC, JP Morgan, Santander, Societe Generale and UBS.

"Some people may think they should have adjusted the size for the demand that they met but they had always said on the roadshow they were targeting 1.5bn."

By the time UniCredit was able to go out with its offer, having concluded a two-day roadshow, Santander's issue was quoted at 99.1, having priced at 100.

"Santander caused a lot of problems for UniCredit. I think at the end of the day no one is surprised by Santander's actions but it just goes against the etiquette of the market," said a syndicate banker away from both trades.

Santander declined to comment.

"UniCredit were trying to get in ahead of a lot of supply and Santander jumped in ahead of them and printed too big a deal that is not performing."

Leads Bank of America Merrill Lynch, Credit Agricole, Credit Suisse, Deutsche Bank and UniCredit's investment banking unit considered delaying the deal, expected to be rated BB- by Fitch, after spending the early part of Wednesday morning eyeing the poor performance of Santander. However, when it bounced back to 99.5, they decided to go ahead.

CHOPPY WATERS

Italy's largest bank by assets was then able to price a 1bn perpetual non-call seven in line with guidance at 6.75%, higher than the mid-6% yield the market had been expecting

Bankers reported extreme sensitivity in UniCredit's order book during execution with a number of investors pulling out just before the bond was priced.

"Overall we are pleased with the outcome of this deal," said Waleed El Amir, head of strategic funding and portfolio at UniCredit.

"The order book reached around 2bn from real-money accounts and the reason we are not seeing too much volatility post-pricing is because the deal was anchored with a buy-and-hold investor base."

By Friday morning, UniCredit paper was bid at 100.875. The deal's performance and the fact that Santander has bounced back has given bankers hope that Santander's underperformance was just a temporary phenomenon.

It does mean, however, that for other frequent AT1 issuers such as Credit Agricole, which is preparing its next capital transaction for as early as next week, the deal execution process will have to be handled with extreme caution.

The same goes for HSBC, which is planning to print a potentially large AT1 bond debut next week, too. (Reporting by Aimee Donnellan; Editing by Helene Durand, Matthew Davies and Julian Baker)

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Detroit needs to shed debt to afford improvements -witness

By Karen Pierog

DETROIT, Sept 5 Fri Sep 5, 2014 1:10pm EDT

DETROIT, Sept 5 (Reuters) - Detroit could not afford to undertake a series of necessary improvements without a court-approved plan to shed a chunk of its debt, a city consultant testified on Friday at a U.S. Bankruptcy Court hearing.

Charles Moore, a senior managing director at restructuring firm Conway MacKenzie Inc, said the six areas of Detroit's government that have been targeted for $1.7 billion of reinvestment initiatives running through June 30, 2023, were essential for the city to provide adequate levels of services to residents and businesses.

"Without the plan, it's uncertain to me how the reinvestment initiatives can be funded," Moore testified during the fourth day of a key hearing to determine whether the city's debt adjustment plan is fair and feasible.

Detroit last year filed the largest municipal bankruptcy in U.S. history. It would shed about $7 billion of its $18 billion of debt and obligations under the plan and the city has reached settlements with most of its major creditors, including pension funds and unions.

Hold-out creditors remain, including Syncora Guarantee Inc and Financial Guaranty Insurance Co, which backed payments on $1.4 billion of pension debt and are facing recoveries of just 10 cents on the dollar or nothing if the city succeeds in voiding the debt all together. Both bond insurers have argued the plan shortchanges them while allowing fatter recoveries for others, including the city's retired workers.

The city would spend the $1.7 billion to eradicate blighted buildings, improve public safety services, update information technology and address other neglected areas.

Moore said the initiatives are expected to boost city revenue by $483 million and cut costs by $358 million through mid-2023. That would leave about $877 million to be covered by debt reductions and other funding sources in the city's plan.

Moore followed Detroit Chief Financial Officer John Hill on the stand. Hill wrapped up his testimony on Friday with questions from Judge Steven Rhodes, who is overseeing the case.

Hill, who previously testified that he is willing to continue as CFO for the post-bankruptcy city, said while the plan will not be easy to implement, Detroit has to maintain a "crisis mentality" to ensure it continues to move forward.

An oversight commission that would be created for Detroit once it leaves bankruptcy should include business professionals who will not hesitate to act, Hill added.

"I believe that pressure will help keep things on track," he said.

On Thursday, the city used most of last week's $1.8 billion refunding bond issue to repurchase $1.47 billion of water and sewer revenue bonds. That means the objections to the plan by owners of the now-repurchased bonds are withdrawn, according to a court filing.

The hearing could take several weeks, with many witnesses including the state-appointed emergency manager and Detroit's mayor called to testify. (Additional reporting by Lisa Lambert in Washington; editing by Matthew Lewis)

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UPDATE 1-Detroit needs to shed debt to afford improvements -witness

Fri Sep 5, 2014 5:58pm EDT

(Adds summary of hearing so far, filing of sealed order)

By Karen Pierog

DETROIT, Sept 5 (Reuters) - Detroit could not afford to undertake a series of necessary improvements without a court-approved plan to shed a chunk of its debt, a city consultant testified on Friday at a U.S. Bankruptcy Court hearing.

Charles Moore, a senior managing director at restructuring firm Conway MacKenzie Inc, said the six areas of Detroit's government that have been targeted for $1.7 billion of reinvestment initiatives running through June 30, 2023, were essential for the city to provide adequate levels of services to residents and businesses.

"Without the plan, it's uncertain to me how the reinvestment initiatives can be funded," Moore testified during the fourth day of a hearing to determine whether the city's debt adjustment plan is fair and feasible.

Detroit last year filed the largest municipal bankruptcy in U.S. history. It would shed about $7 billion of its $18 billion of debt and obligations under the plan and the city has reached settlements with most of its major creditors, including pension funds and unions.

Hold-out creditors remain, including Syncora Guarantee Inc and Financial Guaranty Insurance Co, which backed payments on $1.4 billion of pension debt and are facing recoveries of just 10 cents on the dollar or nothing if the city succeeds in voiding the debt all together. Both bond insurers have argued the plan short changes them while allowing fatter recoveries for others, including the city's retired workers.

The city would spend the $1.7 billion to eradicate blighted buildings, improve public safety services, update information technology and address other neglected areas.

Moore said the initiatives are expected to boost city revenue by $483 million and cut costs by $358 million through mid-2023. That would leave about $877 million to be covered by debt reductions and other funding sources in the city's plan.

While the confirmation hearing on the plan is scheduled to last through Oct. 17, its first four days were consumed by opening statements from plan supporters and opponents, leaving time for testimony from only two witnesses: Moore and Detroit Chief Financial Officer John Hill. Moore is due back on the stand on Monday for continued cross examination.

Detroit had submitted a list of 26 witnesses, including Kevyn Orr, Detroit's state-appointed emergency manager, and the city's mayor, Mike Duggan. One of the city's lawyers has said Detroit may not finish laying out its case until the first week in October.

Judge Steven Rhodes, who is overseeing the case, has allocated each side 85 hours to present their cases.

On Friday, a sealed order was filed in the case, meaning its contents were not publicly disclosed. Previous sealed orders dealt with mediation matters and the judge's bus tour of Detroit.

Hill wrapped up his testimony earlier on Friday with questions from the judge. Hill said that while the plan will not be easy to implement, Detroit has to maintain a "crisis mentality" to ensure it continues to move forward.

An oversight commission that would be created for Detroit once it leaves bankruptcy should include business professionals who will not hesitate to act, he added.

"I believe that pressure will help keep things on track."

(Additional reporting by Lisa Lambert in Washington; editing by Matthew Lewis)

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Santander upsets CoCo cart as floodgates prepare to open

Fri Sep 5, 2014 8:51am EDT

* Santander ploughs into bond market with 1.5bn CoCo

* UniCredit suffers as Santander struggles in secondary market

* HSBC, Credit Agricole and others line up for capital rush

By Aimee Donnellan

LONDON, Sept 5 (IFR) - Santander's push to be the first in a wave of bank capital issuance across Europe threatened to upset the CoCo market just as it is set to take off, when the seemingly oversized trade struggled to perform post-pricing.

The 1.5bn perpetual non-call seven-year Additional Tier 1 deal attracted over 3bn of demand, a far cry from the 17bn the bank received from 820 investors for its inaugural euro issue back in March.

Up until this summer, banks had been able to dictate pricing terms but heightened international political risk, a sell-off in the asset class over the summer and a bulging pipeline of deals are allowing investors to be choosier.

Santander rushed out its deal ahead of a similar trade from UniCredit, but after taking 1.5bn out of the market on the back of the relatively small order book, the deal failed to perform and was still bid below par on Friday at 99.375.

The two issuers announced their intentions of selling AT1s on the same day but Santander was able to pull the trigger faster as it had already tapped the euro market, unlike UniCredit which had only raised AT1 debt in US dollars.

"Santander was ready to go for some time so it was really just coincidental that it came at the same time as UniCredit," said a banker on the trade. The deal was led by Credit Suisse, HSBC, JP Morgan, Santander, Societe Generale and UBS.

"Some people may think they should have adjusted the size for the demand that they met but they had always said on the roadshow they were targeting 1.5bn."

By the time UniCredit was able to go out with its offer, having concluded a two-day roadshow, Santander's issue was quoted at 99.1, having priced at 100.

"Santander caused a lot of problems for UniCredit. I think at the end of the day no one is surprised by Santander's actions but it just goes against the etiquette of the market," said a syndicate banker away from both trades.

Santander declined to comment.

"UniCredit were trying to get in ahead of a lot of supply and Santander jumped in ahead of them and printed too big a deal that is not performing."

Leads Bank of America Merrill Lynch, Credit Agricole, Credit Suisse, Deutsche Bank and UniCredit's investment banking unit considered delaying the deal, expected to be rated BB- by Fitch, after spending the early part of Wednesday morning eyeing the poor performance of Santander. However, when it bounced back to 99.5, they decided to go ahead.

CHOPPY WATERS

Italy's largest bank by assets was then able to price a 1bn perpetual non-call seven in line with guidance at 6.75%, higher than the mid-6% yield the market had been expecting

Bankers reported extreme sensitivity in UniCredit's order book during execution with a number of investors pulling out just before the bond was priced.

"Overall we are pleased with the outcome of this deal," said Waleed El Amir, head of strategic funding and portfolio at UniCredit.

"The order book reached around 2bn from real-money accounts and the reason we are not seeing too much volatility post-pricing is because the deal was anchored with a buy-and-hold investor base."

By Friday morning, UniCredit paper was bid at 100.875. The deal's performance and the fact that Santander has bounced back has given bankers hope that Santander's underperformance was just a temporary phenomenon.

It does mean, however, that for other frequent AT1 issuers such as Credit Agricole, which is preparing its next capital transaction for as early as next week, the deal execution process will have to be handled with extreme caution.

The same goes for HSBC, which is planning to print a potentially large AT1 bond debut next week, too. (Reporting by Aimee Donnellan; Editing by Helene Durand, Matthew Davies and Julian Baker)

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