Monte Paschi to proceed with $2.4bn share sale as planned

Bloomberg

Banca Monte dei Paschi di Siena SpA is clearing the final hurdles for its crucial €2.5 billion ($2.4 billion) share sale, with Chief Executive Officer Luigi Lovaglio close to having enough backing from investors to convince banks underwriting the deal.
Parties are fine-tuning the details in order to start the share sale next week, people familiar with the matter said, asking to not be named because the process is private. Paschi’s directors are set to review the capital increase terms, the people said.
With bank stocks down one-fifth since the Russian invasion of Ukraine and a gloomy economic outlook, lenders responsible for arranging the deal had urged Paschi to find commitments for a large portion of the unsold shares ahead of the sale, in order to sign an underwriting agreement. The share sale would allow a long-awaited revamp of the troubled lender, which was first bailed out in 2009.
Italy’s finance ministry will subscribe 64% of the proposed offering, or €1.6 billion euros, in line with its share of the bank.
Lovaglio and the treasury made a last-ditch effort to convince investors to commit funds and arranger banks to proceed with the offer. Bank of America Corp., Mediobanca, Citigroup and Credit Suisse, along with Banco Santander SA, Barclays, Societe Generale and Stifel Europe Bank, signed pre-underwriting agreements subject to market conditions and investor feedback.
Monte Paschi’s euro bond due July 2029 is poised for its biggest rise since March 18, according to Bloomberg-compiled prices. The 10.5% note rose 4.4 cents on the euro to 57.1 cents as of 9:51 and the 5.375% note due January 2028 climbed 6.9 cents on the euro to 53.7 cents.
Shares were little changed.
Axa SA and Anima Holding SpA, which already have commercial partnerships with Monte Paschi, held talks for a possible participation. While Axa is likely to invest as much as €150 million, Anima hasn’t agreed on the renegotiation of contracts so far, some of the people have said.
Monte Paschi cancelled a previous share sale at the end of 2016 in a last-minute move, in favour of a rescue package from the state. Talks on another capital hike started in late 2020.
Lovaglio is seeking to restructure the historic bank and restore capital buffers after the Italian government failed to comply with a European Union requirement that it exit its stake in the lender by the end of last year. The CEO’s plan also involves cutting about 4,000 jobs in an effort to restore profitability.
The share sale will be offered on a pre-emptive basis to current shareholders and will allow Monte Paschi to comply with the specific capital regulations set by the European Central Bank.