Banca Popolare di Milano (BPM) has come up with an innovative bond linked to top names in the clothing, eyewear and accessories industries. The L20 billion ($11 million) self-led fashion-linked bond is based on an underlying basket of 12 international stocks ranging from Benetton, Bulgari and Gucci to Escada, Hermès, Luxottica and Louis Vuitton Moët Hennessy. The securities pay interest when the paper matures in two years’ time: the holders will receive the appreciation between the value of the basket on payment date and its average price over the life of the bond.
The issue has come to the market over a year after major fashion houses made headlines with highly successful flotations. Asked why it delayed in launching the deal, a BPM spokesman said it expects the arrival of several designer labels – such as Versace and Armani – on the equity market over the next 18 months. This, predicts the bank, will boost the share prices in its fashion basket. Whether such optimism is justified is doubtful: the Versace group has postponed its IPO until 1999 (when the bond matures), following the murder of its designer Gianni Versace.
Undeterred by this setback, or by reports of Gucci’s falling profits, BPM has faith in the family-run fashion business in Italy and this issue has a distinct Italian flavour. But no Italian can ignore the influence of foreign designer labels on the industry and the bank has included three non-Italian stocks in the basket, accounting for 34%.
According to the issuer, Italy’s smaller investors are nervous of risking their capital on the stock exchange and have rushed to buy these unlisted bonds, which relate to one of the country’s favourite industries. Domestic banks also snapped them up for their own clientele. Does BPM have plans to issue a second fashion-linked bond? No; it is considering an issue linked to telecoms and energy companies instead. Rebecca Dobson
