Monte dei Paschi to press ahead with last-ditch private capital increase

Sun Dec 11, 2016 5:21pm EST
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By Elisa Anzolin and Silvia Aloisi

MILAN (Reuters) - Italy's third biggest lender Monte dei Paschi di Siena said on Sunday it would press ahead with a last-ditch plan to raise 5 billion euros on the market by year-end after the European Central Bank refused to give it more time to recapitalize.

The decision by the ECB's supervisory board piles pressure on the Italian government to inject money into the bank but the Tuscan lender on Friday said it would carry on with its own private sector scheme, despite signs of scant investor interest.

Rome is ready to intervene with an emergency decree to rescue the bank if needed, a government source said on Friday.

The crisis at the world's oldest bank is playing out against a backdrop of political instability in Italy after Prime Minister Matteo Renzi's resignation last week following a heavy defeat in a referendum on constitutional reform.

Italy's president on Sunday asked Renzi's foreign minister, Paolo Gentiloni, to form a government and he could be ready as early as Monday to present his list of proposed cabinet members to the head of state.

Monte dei Paschi, which fared the worst in European stress tests this summer, had asked the ECB for a three-week extension to Jan. 20 to raise the money it needs to avert collapse because of the political turmoil unleashed by Renzi's resignation.

But the ECB on Friday rejected the request on the grounds that a delay would be of little use and that it was time for Rome to step in, a source close to the matter said. The bank says it has not received a formal communication from Frankfurt.

The eleventh-hour private solution being drawn up by the bank, advised by JPMorgan and Mediobanca, involves reopening a debt-to-equity swap offer to 40,000 retail investors holding 2.1 billion euros of the bank's subordinated bonds, Monte dei Paschi said in a statement after a board meeting on Sunday. But this needs the approval of market watchdog Consob.   Continued...

The Monte dei Paschi di Siena bank logo is pictured at the bank's headquarters in Siena, Italy January 25, 2013. REUTERS/Stefano Rellandini/File Photo