Paschi Said Failing to Lure Private Buyers as State Prepares Aid
Sonia Sirletti
December 20, 2016, 1:35 pm December 20, 2016, 12:45 pm
(Bloomberg) --
Banca Monte dei Paschi di Siena SpA will probably fail in its effort to raise 5 billion euros ($5.2 billion) of funds from money managers and individuals as potential anchor investors balk and few bondholders agree to swap their notes into stock, said people with knowledge of the matter.
Qatar’s sovereign-wealth fund, which had considered an investment, hasn’t yet committed to buying shares, while a second debt-for-equity swap has raised less than 200 million euros through Monday, said the people, who asked not to be identified because the matter is private. Other institutions that were considering buying shares have indicated that they would put funds in the troubled bank only if it’s able to raise 2 billion euros from the swap and 1 billion euros from cornerstone investors, one person said.
Monte Paschi will probably make a final decision on the share sale once the offer period ends on Thursday, said the person. A spokesman for the bank declined to comment.
The Italian government late Monday
moved closer to a potential rescue of lenders including Monte Paschi by seeking permission from parliament to increase the nation’s public debt by as much as 20 billion euros. The plan is aimed at providing a backstop to the banking system “through public guarantees in order to restore their short- and medium-term lending ability,” Finance Minister Pier Carlo Padoan said following a cabinet meeting Monday night.
Monte Paschi’s plan to raise 5 billion euros has three interlocking pieces: a debt-for-equity swap, a stock offering and the disposal of the soured loans. The capital being raised would be used to cover the bank for losses it would book in selling the bad debt. If the sale fails, the conversions of debt to equity would be nullified.
Monte Paschi expanded and extended its debt-for-equity swap last week. In the previous offer, bondholders had already agreed to exchange about 1.02 billion euros for shares.
If government funds are used in the bank’s recapitalization,
its bondholders will probably have to take losses under European burden-sharing rules. The cabinet is considering a so-called precautionary recapitalization that may reduce the potential losses. A meeting is scheduled Friday to determine the details, a government official said.
“The government action seems to reflect the perspective of a non-positive outcome of Monte Paschi’s recapitalization plan,” Marco Sallustio, an analyst at ICBPI wrote in a report Tuesday.
Bloomberg