Itau Europa to Sell Three-Year Real-Linked Notes (Update2) - Bloomberg.com

Itau Europa to Sell Three-Year Real-Linked Notes (Update2) - Bloomberg.com:
By Camila Fontana

Oct. 28 (Bloomberg) -- Itau Unibanco Holding SA’s European unit plans to sell as much as $100 million of real-linked structured notes this week.

The unit of Brazil’s biggest non-government bank, known as Banco Itau Europa, will sell the three-year securities at an interest rate of 10.5 percent in a private placement, said Mauro Morelli, a member of the company’s executive board. The dollar- denominated notes will be linked to the real, meaning interest and principal payments will fluctuate with movements in Brazil’s currency.

Itau is tapping into demand from investors looking to buy real-based assets without having to pay a 2 percent tax Brazil implemented last week on foreigners’ purchases of stocks and fixed-income assets, Morelli said. The government imposed the tax, known as IOF, in a bid to contain a rally that has made the real the best-performing major currency this year.

“We are issuing to meet demand from investors who want exposure to the real and need an alterative to the IOF in Brazil,” Morelli said in a telephone interview from Lisbon.

To contact the reporter on this story: Camila Fontana Correa in Sao Paulo at cfontana@bloomberg.net
Last Updated: October 28, 2009 17:02 EDT"