Monte Paschi Investor Reaches Deal With Creditors on Collateral

Banca Monte dei Paschi di Siena SpA (BMPS)’s main investor reached an agreement with creditors on collateral contracts for an existing loan to finance Italy’s third-biggest bank’s capital increase.

Fondazione Monte dei Paschi di Siena, which owns 48.4 percent of the bank, signed a standstill accord with the 11 creditors, according to a statement today from the banking foundation. The parties agreed to suspend a collateral mechanism involving Monte Paschi stock until March 15.

“In this period the firm will work on a business plan to balance its financial position,” the foundation said.

The foundation in June borrowed 600 million euros ($781 million) guaranteed with shares of Monte Paschi from 11 banks led by JPMorgan Chase & Co. (JPM) to participate in the bank’s rights offer, two people with knowledge of the matter said Nov. 28. The non-profit institution asked to renegotiate the contract after the collateral was no longer sufficient because of the stock’s decline, said the people.

Fondazione Monte Paschi is in advanced talks with Credit Suisse Group AG (CSGN) for a similar accord on a separate loan, it said today, adding that an agreement will be reached in the next few days. The negotiations involve a separate 490 million-euro loan related to the purchase of so-called FRESH, hybrid securities sold by Monte Paschi in 2008, the people said last month.

Monte Paschi shares have fallen 63 percent this year. They traded at 26.9 cents, up 3.7 percent, at 10 a.m. in Milan.

To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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