Bloomberg

(Bloomberg) -- UBS Group AG is selling $1 billion of the riskiest type of bank debt in Europe’s first sale of the bonds since Britain’s vote to leave the European Union.

The Swiss bank is marketing additional Tier 1 notes to yield about 7.125 percent, according to a person familiar with the matter, who isn’t authorized to speak publicly and asked not to be identified. The notes are expected to be ranked BB+ by Standard & Poor’s Global Ratings, its highest sub-investment grade, said the person.

Issuance in the $106 billion market for the junior bonds, which are the first to take losses in a crisis, has stalled since June 21 on uncertainty that the Brexit vote will throw the U.K. into recession, and as the EU carried out region-wide stress tests on banks. UBS is seeking to take advantage of investor demand for riskier securities as European Central Bank stimulus suppresses yields.

“If anyone was going to re-open the AT1 market, it was going to be UBS,” said Simon Adamson, an analyst at CreditSights Inc. in London. “It’s better positioned than a lot of the other banks and has quite a lot of AT1 issuance to do over the next few years.”

Officials at the Zurich-based bank didn’t immediately comment on the sale.

UBS reported second-quarter profit that beat analysts’ estimates last week and said it’s on track to cut costs by 2.1 billion Swiss francs ($2.2 billion) through 2017.

Borrowing costs on the riskiest bank bonds have fallen to 6.7 percent from 7.9 percent in February, according to Bank of America Merrill Lynch index data.

To contact the reporter on this story: Joe Mayes in London at jmayes9@bloomberg.net. To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net, Mark McCord, Abigail Moses

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