Monte dei Paschi hopes to buy time on $3.4 billion fundraising: sources

Wed Sep 25, 2013 2:31pm EDT
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By Stefano Bernabei and Francesca Landini

ROME/MILAN (Reuters) - Italy's Monte dei Paschi di Siena BMPS.MI has delayed approval of a restructuring plan because it is hoping the European Commission will give it more time to raise a planned 2.5 billion euros ($3.4 billion), two sources close to the situation said.

The issue is crucial in determining the bank's future because the Commission has said that if the bank cannot raise the funds on the market, the government would have to convert its loans to the bank into equity, effectively nationalizing it.

Monte dei Paschi was brought close to collapse by the euro zone debt crisis and most analysts say it could struggle to lure private investors to its planned cash call.

At 2.5 billion euros, the capital injection requested by Brussels is more than twice the amount originally penciled in by the bank and roughly equal to the bank's current stock market value.

EU Competition Commissioner Joaquin Almunia said earlier this month the fundraising would have to be carried out within 12 months of the plan's approval by the EU.

A source close to the Commission said on Wednesday the time frame of the capital increase had been agreed on by Rome and Brussels and was "no longer an issue of negotiation".

The lender, Italy's third biggest, also has yet to reach an agreement with Brussels on top management pay, which the EU wants to cap, people familiar with the matter said.

Monte dei Paschi's board on Tuesday postponed approval of the long-awaited plan, which is aimed at winning the EU's green light for a 4.1 billion euro state bailout the lender took earlier this year.   Continued...

A man walks on a logo of the Monte Dei Paschi Di Siena bank in Rome September 24, 2013. REUTERS/Alessandro Bianchi