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UPDATE 1-Camfin launches convertible bond to pay back debt

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* Fixed-rate bond worth 150 mln euros

* Bond is convertible into Pirelli shares

* Tronchetti Provera, Malacalza had clashed over bond issue

(Adds more information on bond issue, shareholder dispute,share prices)

MILAN, Oct 12 (Reuters) - Italian holding company Camfin, which controls tyremaker Pirelli , said onFriday it launched a fixed-rate 150 million euro ($194.14million) bond convertible into Pirelli shares to pay back Camfindebt.

The bond launch marks a victory for Pirelli Chairman MarcoTronchetti Provera in his two-month feud with Camfin shareholderMalacalza Investimenti, which opposed the bond issue and foughtfor a capital increase as a better way to repay Camfin loanscoming due at year-end.

It also paves the way for Tronchetti's plan for Camfin torecapitalize loss-making real estate group Prelios , inwhich Camfin owns a 14.8 percent stake.

Camfin said it will use 132.4 million of the bond issue torepay debt coming due at the end of 2012, and the rest to investin Prelios' rescue deal, approved on October 11.

Pirelli will not issue new shares to be converted when thebond matures. The 5.85 percent of Pirelli will be sharessupplied by Camfin, and placed in a holding vehicle in serviceof the bond. The actual stake of Pirelli ultimately converted bybondholders may be less that 5.85 percent.

Pirelli shares fell 0.9 percent to 8.77 euros at 0722 GMT,and have risen 36 percent so far this year. Camfin shares wereup 4.7 percent at 0.50 euros in a broadly flat Milan stockmarket.

The Camfin bond will have a coupon of between 5.25 percentand 6 percent. The implicit conversion price will be calculatedbased on a premium of between 27.5 percent and 32.5 percent ofthe average Pirelli share price between the bond's launch andthe setting of the final terms.

Banca IMI , BNP Paribas and Unicredit

are joint bookrunners and joint lead managers for thesale.

Malacalza Investimenti opposed the bond issue, Camfin saidon Friday, and its three board member resigned after havingfiled a lawsuit against Camfin on October 9.

"Camfin sees no likely impact on the legal actionsundertaken by Malacalza Investimenti on the bond issue," it saidin a statement.

Malacalza Investimenti took a 12 percent stake in Camfin in2009, becoming its second-largest shareholder and signing ashareholder pact with Tronchetti Provera. That pact now looksunlikely to be renewed.($1 = 0.7726 euros)

(Reporting by Jennifer Clark; Editing by Lisa Jucca)

((jennifer.clark1@thomsonreuters.com)(+3902 66129422))

Keywords: CAMFIN BOND/