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MILAN/LONDON, March 24 (Reuters) - Italy's largest bank by assets, UniCredit, started advertising a new hybrid dollar-denominated bond at an investors' roadshow in Europe and Asia on Monday.
UniCredit is seeking to beef up its capital base with the risky but increasingly popular type of security, which it hopes to issue later this year, and bankers close to the deal have said it plans to raise the equivalent of 2 billion euros .
The lender posted a 2013 loss of 14 billion euros ($19 billion), the biggest ever by an Italian bank, after taking huge writedowns on bad loans and past acquisitions to clean up its balance sheet in time for an industry-wide asset review by European regulators.
Its perpetual Additional Tier 1 bond is a hybrid bond as it combines both debt and equity characteristics. This new-style hybrid bond is riskier than regular bonds because investors suffer automatic losses if the capital that the issuing bank holds against risks falls below a certain level.
Such innovative financial products have been well received in the current environment of ample liquidity and low interest rates, as investors moving capital out of emerging markets look elsewhere for high returns.
European banks including Santander, Credit Agricole , Societe Generale and KBC have all issued or announced plans to issue these kind of hybrid bonds.
"UniCredit has announced a three-day roadshow in Asia and Europe to discuss a potential Additional Tier I transaction, which may be launched in the near future subject to market conditions," a UniCredit spokeswoman said.
The roadshow, which runs until Wednesday, is taking place in Singapore, Hong Kong, London, Frankfurt, Paris and in Switzerland, a banking source said. It will only be offered to investors who are not resident in the United States.
UniCredit, Citigroup, HSBC, Societe Generale and UBS will act as joint bookrunners for the bond, banking sources said.
The sources also said the issuance had a mechanism that triggers a temporary writedown on the value of the bond if the bank's Common Equity Tier 1 ratio - the best quality portion of the capital a bank must put aside against risks - falls below 5.125 percent.
UniCredit's Common Equity Tier 1 capital stood at 9.4 percent of the lender's risk-weighted assets at the end of 2013.
The Merrill Lynch CoCo index, an index created to track these new-style bonds, hit a low of 100.529 at the end of January and was trading below 103 for most of February but has since recovered and was quoted at 103.035 at Friday's close.
($1 = 0.7256 euros)
(Additional reporting and writing by Lisa Jucca; Editing by Pravin Char)