Troubled Italian Bank May Seek Larger Share Sale

http://www.nytimes.com/2014/04/16/business/international/troubled-italian-bank-may-seek-larger-share-sale.html

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PARIS — Shares of Monte dei Paschi di Siena fell sharply on Tuesday after a report that the troubled Italian bank was seeking to raise substantially more cash than investors had been expecting.

The bank is seeking to raise 5 billion euros, or $6.9 billion, instead of the €3 billion investors had anticipated, the Italian news agency ANSA reported late Monday.

Monte dei Paschi shares fell 9.3 percent through early afternoon trading in Milan on Tuesday, valuing the company at about €2.65 billion. A larger issuing of new shares would mean existing investors would have the value of their holdings, and their claims on future profit, reduced by more than they had expected.

Monte dei Paschi, which was founded in 1472 and is still deeply a part of the business, political and community life of the Tuscan city of Siena, ran into financial difficulty with the 2007-8 acquisition of the Italian bank Antonveneta and subsequent attempts to hide losses with derivatives deals. In 2013, the Bank of Italy stepped in with a €4.1 billion bailout.

Monte dei Paschi would use most of the proceeds to pay down what it owes the Italian government, ANSA said, while holding the remainder in reserve to address any shortcomings that might be identified in stress tests and asset-quality reviews being carried out by the European Central Bank this year.

If Monte dei Paschi is unable to make interest payments on those loans, the government would — as soon as July — begin collecting interest in the form of shares, starting a de facto nationalization of the bank. In December, shareholders blocked management’s proposal that a share sale be held in January to raise €3 billion to repay the state.

“The bank is assessing the implications in relation to the amount of funds necessary to pay back this year state aid as pledged with the European Commission,” Monte dei Paschi said in a statement on Tuesday.

Asked if a €5 billion capital increase was under consideration, a spokesman for the bank in Siena declined to comment.