Exclusive: Italy preparing to take controlling stake in Monte dei Paschi - sources

Tue Dec 6, 2016 2:15pm EST
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By Stefano Bernabei and Giuseppe Fonte

ROME (Reuters) - Italy is preparing to take a 2 billion euros controlling stake in Monte dei Paschi di Siena (BMPS.MI: Quote) as the bank's hopes of a private funding rescue fade following Prime Minister Matteo Renzi's decision to quit, two sources close to the matter said on Tuesday.

The government is already the ailing bank's single largest shareholder with a four percent share, but is planning to buy junior bonds held by ordinary Italians to take the stake up to 40 percent, the sources said.

This would make it by far the biggest shareholder, meaning the Treasury would be able to control Italy's third biggest bank and its shareholder meetings.

The sources said a government decree authorizing the deal, which would see the state buy the subordinated bonds from retail investors and convert them into shares, could be rushed through as early as this weekend.

Monte dei Paschi must raise 5 billion euros ($5.4 billion) by the end of this month to avoid being wound down, but private investors are reluctant to provide cash after Renzi lost a referendum on Sunday and announced plans to resign.

The bank is set to raise 1 billion euros from a bond swap with institutional investors and Rome is hoping the 2 billion euros participation from the government could help persuade private investors to fill the 2 billion euros gap.

"It's a de-facto nationalization with a strong presence by the state that can attract other investors and allow the transaction to be completed," said one of the sources, speaking on condition of anonymity.

The Treasury and Monte dei Paschi declined to comment.   Continued...

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