A SUPPLEMENT TO EUROMONEY - MARKETS 1997: What's ahead
INA
The Italian government's long-awaited offering of bonds convertible into stock in the privatized insurance company INA was a runaway success. When the three-day marketing period began on June 19 it was worth $1.3 billion and the bonds offered were convertible into 21% of INA. But such was demand from domestic and overseas institutional investors that within 24 hours the Italian government had virtually doubled the issue. Even then, it was oversubscribed eight times.
The issue was handled by Goldman Sachs and Istituto Mobiliare Italiano. Its success enabled the government to dispose of most of its residual 34.38% holding in the company, taking the sale to $2.1 billion. The bonds were divided into lire-denominated and dollar-denominated tranches (both issued at par). The lire bonds carried a coupon of 7% while the dollar bonds paid 5.5%; both ran to a five-year maturity. Significantly, 60% of the dollar tranche went to convertible-bond specialists, while most of the lire tranche was taken by holders of Italian bond and equity portfolios.
The issue was reserved for institutional investors and some observers took this to be a time and cost-saving measure.