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Libya loses multi-million paper profit while UniCredit stake diluted

Libya’s stake in UniCredit, one of the country’s major international investments from the Qaddafi era was slashed when the loss-making Italian bank launched an emergency $14.4 billion recapitalisation while it has missed out on a significant profit because it did not take part.

In January when shareholders in Italy’s largest bank agreed the cash call, shares held by the Central Bank of Libya working with the Libyan Arab Foreign Bank and separately by the Libyan Investment Authority represented 2.95 and 1.27 percent respectively of all Unicredit stock.

None of the Libyan entities took up the option to buy into the rights issue. Therefore, as minutes released by UniCredit today make clear, after the February capital raising the LCB stake was diluted to just 0.82 per cent of the Italian bank’s capital. No figure was given for the percentage that the LIA now holds.  These investments continue to be frozen under UN sanctions with all other Qaddafi-regime assets.

Moreover Libya has suffered a financial loss because there was clearly no spare capital to buy into the rights issue. Had it been possible to participate, Libya would be showing a substantial paper profit at least, since the shares have risen 40 percent in the last three months.

UniCredit’s largest investor is the now the US firm Capital Research and Management followed by the Abu Dhabi sovereign fund Aabar, each with just over five percent.

UniCredit, which expanded rapidly 20 years ago particularly into Eastern Europe, has been burdened with non-performing debt which makes up around 11 percent of all its lending.

In the final three months of last year it had to set aside  $14.4 billion in provisions for loans that had gone sour.  This year’s rights issue was part of a drive to restore the bank’s fortunes under new management .

 
 
(libyaherald)

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