Bailout looms in Monte dei Paschi’s funding scramble
TROUBLED Italian lender Monte dei Paschi di Siena edged closer to a state bailout on Thursday as its last-ditch plan to raise billions of euros risked falling short.
BMPS, the world’s oldest bank, launched a bid to sell fresh shares this week under plans to raise 5 billion ($5.2 billion) in new capital.
The result of the share offer was due to be released late yesterday or early today, but the bank acknowledged that it had failed to attract an anchor investor after pinning its hopes on a big Qatari takeup.
A separate debt-for-equity swap offer, which is also part of the plan to replenish its coffers, reaped just over billion, the bank also said. The plan additionally entails selling off 27.6 billion euros in bad loans.
BMPS is at the centre of a crisis in Italy’s banking sector – made up of some 700 banks – which is buckling under the weight of bad loans estimated to total 360 billion.
Shares in the bank have fallen over 80 percent in the past year and it achieved the worst results in a July stress test by the European Banking Authority.
The It a l i a n parliament approved on Wednesday a 20 billion bailout package that would aim to stem the woes of the ailing banking sector.
Analysts say the “weak appetite” among private investors so far towards bolstering the bank’s coffers by 5 billion raises the likelihood of a state injection.
“The low probability of achieving this amount increases [the] odds of some kind of government rescue,” said Ipek Ozkardeskaya, of London Capital Group, said in a note to clients.
But the government has several options depending on how much the bank manages to pull off itself, said Lorenzo Codogno, of LC Macro Advisors Limited and a former senior Italian finance ministry official.
“If the shortfall is limited, the government could step in and inject probably up to another billion” without triggering a socalled bail-in, meaning share- holders must also take a writedown on some of the debt they are owed, he said.
But, he added, that “If the whole operation fails, the government would have to intervene” with a “precautionary recapitalisation”.
This means shareholders and holders of junior bonds, a risky class of debt, must contribute to saving the bank.
Just over 40,000 private individuals hold BMPS bonds.
The government is studying a scheme to compensate any losses that high-street savers would suffer.
It is keen to avoid a repetition of scenes sparked by last year’s rescue of four small banks that led to heavy losses for savers, prompting demonstrations and at least one suicide.