(Reuters) -Clearinghouse Euroclear said it had mistakenly credited the payment of coupons on some financial instruments Italy's UniCredit had opted not to pay but was in the process of reversing them.
Last week Italy's No. 2 bank decided to skip the payment of coupons on legacy instruments, known as CASHES or convertible and subordinated hybrid equity-linked securities, in a U-turn that unnerved the market and sent the bond in question into a tailspin.
The decision, taken by new Chief Executive Andrea Orcel barely a month after his arrival, took bond investors by surprise after the lender's chief financial officer said in February the bank expected to pay a coupon.
In a statement, Euroclear, which settles and clears securities trades executed on European exchanges, said it had told clients on May 19 the payments would not take place.
"Due to an internal processing error, nevertheless provisional credits were made and became visible to clients. No payment has been made," it said, adding it was reversing the provisional credits.
On Wednesday Bloomberg cited sources saying some bondholders had received notice of a coupon payment. Holders of the 2.98 billion euro ($3.6 billion) bonds received the notification on Tuesday, it said. (https://bloom.bg/2SrB5dN)
Since the pandemic broke out bond investors have been concerned banks could decide not to pay coupons on some debt which provides the option to defer payments.
The interest payments withheld by UniCredit so far amount to 30 million euros. They would total 120 million euros for the whole of 2021 if the decision were upheld in coming quarters, as has happened in the past when payments were skipped in the first quarter.
On Tuesday a spokesman for the Italian bank said "UniCredit confirms its decision not to pay the CASHES' coupon and has not given anyone mandate to do so."
On Wednesday it declined to further comment beyond its earlier statement.
($1 = 0.8200 euros)
(Reporting by Vishal Vivek in Bengaluru and Stephen Jewkes in Milan; Editing by Devika Syamnath, Kirsten Donovan and Richard Chang)