The Italian bank UniCredit has made its first ABS tender offer since 2010 to repurchase up to  €1 billion ($1.28 billion) of its Italian RMBS and lease ABS bonds.

The cash offer is due to expire on Sept.r 24, 2012 with the results likely to be announced the next day. According to the tender offer notice, settlement is expected to be on 27 September 2012.

Although UniCredit is one of the stronger banks in Italy, asset quality in Italian banks has declined, while nonperforming loans have increased 1.4% year-over-year, according to a Barclays Capital report published today. 

Nonperforming loan coverage ratios in Italian banks tend to be lower than average because they rely heavily on collateral to guarantee loan exposures, said the report. 

"This may not continue for long because asset values are also declining which may cause regulators to call for higher levels of cash provisions," analysts said in the report. "We believe that this could be one of the factors influencing the bank’s decision to carry out tender offers."

The tender will be based on the so-called "Dutch auction procedure" where offers are accepted at the price specified by the investor. The step, analysts explained, will better position UniCredit to choose the best price on an investor-by-investor basis and removes the need for the bank to commit to a single clearing price.

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