Investors reluctant to back Monte Paschi's cash call

Tue Sep 13, 2016 1:53pm EDT
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By Simon Jessop and Maiya Keidan

LONDON (Reuters) - Investors are reluctant to back Monte dei Paschi di Siena's (BMPS.MI: Quote) bid to raise billions of euros, leading fund managers and a source with knowledge of the matter told Reuters, posing a huge challenge for a new CEO seeking to save the Italian bank.

The lender, which is expected to name a new chief executive on Wednesday, must raise up to 5 billion euros ($5.6 billion) as part of an emergency rescue plan to stave off the risk of being wound down and a wider banking crisis that would send shockwaves across Europe.

But its 45-billion-euro mountain of bad loans is deterring investors from backing it in its third recapitalization in as many years, according to four leading European fund managers and the investment banking source with knowledge of the matter.

Since the private sector-backed rescue blueprint was announced in late July, hundreds of investors had been sounded out about buying stock but interest has been lukewarm, said the source.

The source added this had triggered the departure of CEO Fabrizio Viola, who agreed to make way for a new boss to come in to persuade investors to back the cash call.

Gennaro Pucci, chief investment officer at London-based investor PVE Capital, said he would not buy shares because, even if a significant proportion of its bad loans were spun off into a special vehicle - as envisaged under the plan - he feared the bank could suffer further losses from remaining soured debt.

A similarly skeptical view was expressed by the other three European fund managers who told Reuters they would not be buying Monte dei Paschi equity. They declined to be named, saying their business dealings were confidential.

Monte dei Paschi declined to comment.   Continued...

A logo of Monte dei Paschi di Siena bank is seen on the ground in Siena, Italy, November 5, 2014. REUTERS/Giampiero Sposito/File Photo