Monte dei Paschi investors support latest cash call in turbulent markets

Monte dei Paschi investors support latest cash call in turbulent markets

Written by Silvia Ognibein and Valentina Za

SIENA, Italy (Reuters) – Shareholders in Monte dei Paschi di Siena on Thursday approved a new share sale of up to 2.5 billion euros ($2.5 billion), while doubts remain over whether the state-owned bank can implement the latest his version. cash call.

Five years after a bailout that gave the state a 64% stake, MPS needs the money to cut costs by getting rid of thousands of employees through costly early retirements and replenishing capital reserves.

CEO Luigi Lovaglio said MBS will launch its seventh stock issue in 14 years in October, while a new government is formed after national elections on September 25.

“This is the official start of the match. Now we are racing,” he said.

Stagflation fears complicate Lovaglio’s job, as MPS can’t offer a sufficient discount on its new stock after its market value has fallen 60% this year.

Italy will cover 64% of the share issuance, but private investors will have to provide the rest to avoid violating European rules on state aid.

“We are focused on repatriating €2.5 billion in one go within the expected timeline,” Lovalho said in response to a question about whether MBS could fall short of its maximum target.

MPS needs the funds in November to take advantage of early retirement laws that expire at the end of the month.

Lovaglio, a respected ex-executive of UniCredit hired by the Treasury after failing to sell MPS to UniCredit, has secured a pre-subscription agreement with a group of eight banks led by Bank of America (NYSE :), Citi, Credit Suisse and Mediobanca (OTC) :).

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Underwriters have the right to walk away if investor feedback is negative. A person close to the consortium said the banks would assess the market’s situation after Lovaglio’s investor meetings in London next week.

People familiar with the matter said MPS’s trading partners, asset manager Anima Holding and insurer Axa, are open to providing capital to Bank Tuscan in exchange for strengthening their trade agreements.

Lovaglio has so far refrained from discussions with either because stronger trade ties will make it more difficult for MPS to seek a merger partner in the future to allow Rome to cut its stake.

He said that Axa and Anima are welcome to invest in the cash invitation on the same terms as other investors.

“A potential review of our business partnerships can only follow the usual rationale for this type of agreement, and in the best interests of the Bank,” added Lovalho.

One person said that the anima might be willing to contribute up to 250 million euros. News of Anima’s support sent MPS shares higher this week and its subordinated bonds, which have been hit by equity concerns. (1 dollar = 1.0026 euros)

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