UPDATE 1-Camfin launches convertible bond to pay back debt

* 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 on Friday it launched a fixed-rate 150 million euro ($194.14 million) bond convertible into Pirelli shares to pay back Camfin debt.

The bond launch marks a victory for Pirelli Chairman Marco Tronchetti Provera in his two-month feud with Camfin shareholder Malacalza Investimenti, which opposed the bond issue and fought for a capital increase as a better way to repay Camfin loans coming due at year-end.

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

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

Pirelli will not issue new shares to be converted when the bond matures. The 5.85 percent of Pirelli will be shares supplied by Camfin, and placed in a holding vehicle in service of the bond. The actual stake of Pirelli ultimately converted by bondholders 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 were up 4.7 percent at 0.50 euros in a broadly flat Milan stock market.

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

Banca IMI , BNP Paribas and Unicredit

are joint bookrunners and joint lead managers for the sale.

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

"Camfin sees no likely impact on the legal actions undertaken by Malacalza Investimenti on the bond issue," it said in a statement.

Malacalza Investimenti took a 12 percent stake in Camfin in 2009, becoming its second-largest shareholder and signing a shareholder pact with Tronchetti Provera. That pact now looks unlikely to be renewed. ($1 = 0.7726 euros)

(Reporting by Jennifer Clark; Editing by Lisa Jucca)

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

Keywords: CAMFIN BOND/