Banca Monte dei Paschi di Siena SpA’s bondholders agreed to swap about 1.02 billion euros (US$1.1 billion) in subordinated notes for shares as the attention of investors shifts to whether the bank is able to attract investors to a stock offering.
The Italian treasury is considering “precautionary” direct state intervention to rescue the bank, a plan that has already been sketched out by Rome and Brussels, Il Sole 24 Ore reported yesterday, without saying where it got the information.
The lender’s executives are meeting with European Central Bank (ECB) officials today and might ask for a delay to a non-performing loan sale that is part of the bank’s capital increase plan, the newspaper said.
Bondholders agreed to convert almost one-quarter of the 4.3 billion euros of debt offered subject to the swap, according to final results released yesterday by the Siena, Italy-based bank.
The lender last month said that it expected investors to exchange 1.04 billion euros.
That was before Italians rejected proposed constitutional reforms in a referendum on sunday, setting off political turmoil and prompting Italian Prime Minister Matteo Renzi to say he will resign.
The swap was “a very good result, but what’s crucial for the success of the deal is the commitment from anchor investors,” Fabrizio Spagna, managing director at Axia Financial Research in Padua, Italy, said by telephone. “I’m skeptical that there are subjects available to subscribe the equity, and the outcome of the referendum may add pressure.”
The debt for stock exchange is one of the three main interlocking pieces of a 5 billion-euro capital increase, which would also include a cash infusion from anchor investors and a share sale.
The funds raised will be used to cover losses from the divestment of soured loans, a move requested by the ECB.
Failure could force Monte Paschi into resolution, which could mean losses for shareholders and bondholders and reverberate across Europe.
Monte Paschi is to decide within the next few days whether it will proceed with a planned capital increase, people with knowledge of the matter said.
The underwriters, who met with the bank’s executives on Monday, are still waiting for a formal commitment from possible anchor investors, the people said, asking not to be identified because the matter is private.
Potential investors are seeking more time to review the political situation after the referendum, the people said.
Italy’s political vacuum threatens to usher in a period of uncertainty that might weigh on plans to reduce a pile of bad loans estimated at 360 billion euros.
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