A spokesman of UniCredit said on Friday that the bank would not be paying coupons on their euro-denominated convertible and subordinated hybrid equity-linked note known as CASHES (ISIN: XS0413650218) after the Italian lender posted a €2.79bn ($3.4bn) loss in 2020. Reuters says that CFO Stefano Porro told analysts that ‘they expected to pay the coupon on the bond, issued in 2008 to strengthen its Tier 1 capital, as well as on AT1 bonds’. A reported loss was one of the conditions that allowed UniCredit to forego payments on the €2.98bn CASHES notes. The withheld payments amount to €120mn ($146mn) for 2021. Citi analysts said that the decision on the CASHES note would not affect UniCredit’s capital distribution policy. “While this can be a negative surprise for the CASHES bondholder, this should not affect the bank’s ability to pay dividends on 2021 profit nor impact the announced buyback” they noted. Reuters added that investors were worried about any decision by banks to not make coupon payments on debt that have an options to defer them, including CoCos. They added that UniCredit has earlier withheld coupon payments on its CASHES notes in the past when ending the year in the red. UniCredit is currently undertaking a share buyback programme worth €179mn ($218mn) with an update published on May 19.

While its CASHES bond fell 7 cents on the euro to 54.25 cents, its other bonds were relatively stable. Its EUR 6.75% Perps are at 101.6, yielding 1.2% and its USD 8% Perps are at 110.7, yielding 4.2%

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