Monte Paschi Bondholders Approve 8.3 Billion-Euro Restructuring

Banca Monte dei Paschi di Siena SpA, Italy’s third-largest bank, won creditor approval to change the terms on

8.3 billion euros ($9.3 billion) of covered bonds.

Bondholders agreed to allow the securities to become pass-through notes at a June 25 meeting, according to a statement to the Luxembourg Stock Exchange. The new terms let the bank extend the bonds’ maturities in the event of default, preventing fire sales of assets.

Monte Paschi’s Chief Executive Officer Fabrizio Viola is juggling the need to rebuild capital buffers, eroded by mounting bad loans, with pressure to restore profit at the world’s oldest bank. Dutch bank NIBC Holding NV was the first to adopt the pass-through structure in 2013, while Dutch lender Van Lanschot NV and Italian bank UniCredit SpA sold similar notes earlier this year.

Monte Paschi raised 3 billion euros in a stock sale completed earlier this month -- its second in less than a year - - to reimburse the remaining 1.1 billion euros owed to Italy following a state bailout in 2013 and to strengthen finances.

The bank, engulfed in legal probes of alleged misconduct by former managers, returned to a profit in the first quarter after 11 straight quarterly losses.

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