- Italy requests extension of exit deadline for struggling MPS
- The Treasury will inject billions of euros into MPS
- Rome strives to spare MPS bondholders from losses
ROME, October 26 (Reuters) – Italy plans to negotiate with the European Commission a “long extension” of the deadline to reduce Rome’s 64% stake in ailing bank Monte dei Paschi di Siena (MPS) (BMPS). MI), according to a source close to the case told Reuters.
The extension that will be requested by the Treasury in Brussels will amount to “years”, said the source, without further details.
This development comes after the failure of negotiations with the Italian bank n ° 2 UniCredit (CRDI.MI) on a possible merger agreement with the Tuscan lender. Read more
Rome believes the European Commission has no interest in putting Italy in a difficult negotiating position, added the source, who declined to be identified due to the sensitivity of the issue.
Under a state bailout agreed with Brussels in 2017 at a cost of 5.4 billion euros ($ 6.28 billion), the Treasury was to reduce its 64% stake in MPS at most. late in the approval of its 2021 results, that is to say mid-2022. later.
After estimating that UniCredit’s € 6.3 billion capital demand was too high a price to pay to offload MPS, the Italian Treasury must now meet the bank’s capital requirements that MPS set at 2, 5 billion euros.
A cash injection is now expected to exceed that figure, two sources familiar with the matter told Reuters on Monday. One of the sources said it could total $ 3.5 billion, or 3.5 times the bank’s current market value.
Italy has so far set aside 1.5 billion euros to recapitalize Monte Paschi. Developments on this could be included in Rome’s 2022 budget which is expected to be unveiled by Prime Minister Mario Draghi’s government this week.
The capital increase would be carried out as a market operation to avoid any “burden sharing” with holders of junior bonds. These investors have to bear losses under EU rules if the fundraising qualifies as state aid.
Private investors contributed 2.8 billion euros to the rescue of MPS in 2017 through a debt-for-equity swap.
Italy is also planning to implement some of the measures it had proposed to UniCredit as part of a new stand-alone plan for MPS.
The bank’s remaining debts, worth around € 4 billion, will go to state-owned bad debt manager AMCO, while state agency Fintenca is expected to support up to € 5 billion. billion euros in legal claims arising from ongoing MPS lawsuits.
($ 1 = € 0.8593)
Report by Giuseppe Fonte; Editing by Gavin Jones and Mike Harrison
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