Overhaul at Italy's oldest bank looks to new investors
Baku, June 28 (AZERTAC). Banca Monte dei Paschi di Siena laid out a painful restructuring plan on Wednesday, a day after the world's oldest bank was forced to take state aid, and said it would be looking to new investors in seeking to raise up to 1 billion euros ($1.25 billion)in new equity capital over the next five years.
Monte dei Paschi is the first Italian bank to have to resort to state aid since 2010 as the euro zone crisis deepens, with the bank hit hard by its 25 billion-euro exposure to Italian government bonds, which is proportionally higher than that of its domestic peers.
Under its restructuring plan Italy's third biggest lender said it aims to slash its loan book, close 400 branches and cut 4,600 jobs, and also estimated it would sell 1.5 billion euros of new special bonds to the Italian treasury, against a maximum of 2 billion euros approved by the government on Tuesday.
That will bring total state support to the bank to 3.4 billion euros, including similar bonds that Monte Paschi already sold to the state in 2009. The bank pledged to almost entirely pay them back by the end of its 2012-2015 plan.
In the new restructuring plan, drawn up by newly appointed chief executive Fabrizio Viola and Chairman Alessandro Profumo, the bank said it would seek approval for a capital increase in the form of new shares, convertible bonds and/or warrants of up to 1 billion euros, to be carried out in the next five years.
It said existing shareholders' option rights to buy into the cash call would be waived, indicating it intends to aim the capital hike at new investors.
That would further dilute its cash-strapped top shareholder - a charitable foundation with close political ties that has already been forced to cut its stake to 36.3 percent from nearly 50 percent to pay back its own debts.
"With 3.4 billion of Tremonti bonds the bank is already in the hands of the Government, virtually," said Fabrizio Bernardi, an analyst at Fidentiis Equities, referring to the special bonds underwritten by the Treasury and named after former economy minister Giulio Tremonti who first launched the scheme in 2009.
"I guess a dilution of the Foundation is one option to convince somebody to enter MPS. With a very scarce appetite for any Italian kind of paper, the issue price of whatever instrument will be very penalizing in terms of dilution."
If the bank cannot find private investors willing to buy, the capital increase could be underwritten by state holding Cassa Depositi e Prestiti, increasing the government's grip on the bank.
After posting a 4.7 billion euro loss in 2011 due to massive goodwill writedowns, MPS also said on Wednesday it had started a new impairment test on goodwill as of June 2012 and will announce its outcome with first-half results.
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