© Reuters The logo of the Monte dei Paschi di Siena bank is seen at the entrance of a bank in Rome, Italy August 16, 2018 REUTERS / Max Rossi
By Pamela Barbaglia and Valentina Za
LONDON/MILAN (Reuters) – Monte de Pasi ( MPS ) Chief Executive Luigi Lovaglio is under pressure from the state-owned bank’s major trading partners to raise up to 2.5 billion euros ($2.5 billion) in capital. Sources close to the matter said.
Lovalio is in talks with AAAAA and Anima on the stake sale as part of a stronger business tie-up despite the two partners’ interest in investing in MPS, the sources said.
A move closer to a time when the state is looking to reduce its 64 percent stake could hamper MPS’s search for a future merger partner. The banks organizing the share issue, however, have been looking at the need for cornerstone investors, sources said earlier.
Given the current market value, the banks face a tough task of placing new shares that value MPS at a more expensive multiple than its stronger peers such as UniCredit.
After holding an informal meeting with top executives from AAAA and Anima in London on Thursday, which was first reported by Bloomberg News, Lovalio agreed to hold long-delayed talks next week, two of the sources said, adding that it was unclear whether that would be the case. to agreement.
Lovalio reiterated that discussions surrounding the cash call meant that MPS should remain separate from any revisions to business deals with asset manager Anima and insurer AXA.
He has been trying to raise money without their participation until mid-November to cut the cost of an expensive early retirement plan for workers.
But markets under threat of recession make it difficult to attract buyers for a bank valued at €300m after burning through €25bn of investor cash.
No firm commitment.
Lovalio’s refusal to work with AAAAA and Anima has angered some of the banks that signed the initial commitment to stock up on unsold shares, one of the sources said.
Time to review the partnership is now tight, with MPS planning to launch its funding call in mid-October to secure funding in mid-November.
Anima could contribute up to 250 million euros to MPS’s capital increase, including an upfront payment for improved partnership terms, a source said earlier.
Led by Bank of America (NYSE: ). Citigroup (NYSE: ), Credit Suisse and Mediobanca (OTC: ), the group of banks overseeing the capital increase, could walk away from the deal if feedback from investors is negative.
The banks do not yet have firm commitments from any investors, said a person close to the consortium.
Even investors with long-standing ties to Lovalio, such as French entrepreneur Denis Dumont, want to wait to see the outcome of Italy’s general election on Sunday, another person close to the matter said.
MPS must protect private funds so that the EU does not breach rules on state aid. The state is allowed to cover 64% of the MPS capital increase with the share it gets after the 2017 bailout.
Italy’s rules, which expire after November – allowing people to retire up to seven years after retirement age – will force MPS to stockpile funds as investors wait to gauge the depth of the expected recession in Europe. ($1 = 1.0164 EUR)
(Reporting by Pamela Barbalian in London and Valentina Za in Milan; Editing by Paul Simao)