• Popolare di Vicenza needs funding to meet European regulations
  • Fund to take biggest stake at 1 billion euros-plus: PM Renzi

Mediobanca SpA emerged as the biggest potential buyer of shares in a planned 1.5 billion-euro ($1.7 billion) capital increase for Banca Popolare di Vicenza SpA, which was designed to meet the demands of European bank regulators.

Even so, because of limited demand from institutions, Italy’s bank-rescue fund -- Atlante -- is expected to keep “the vast majority of the capital increase,” according to terms of the deal seen by Bloomberg before books closed Friday.

Mediobanca subscribed to about 5 percent of the initial public offering, said a person with knowledge of the matter, asking not to be identified because the transaction hasn’t been finalized. Institutional investors offered to buy less than 10 percent, according to two other people.

“Atlante will invest a little bit more than 1 billion euros in Pop. Vicenza,” Italian Prime Minister Matteo Renzi said Friday during a press conference in Rome.

The troubled lender sought investor funds to comply with a request from the European Central Bank, which warned it could face bankruptcy proceedings without a capital increase. The Italian government and financial institutions this month set up Atlante to act as a backstop to the fundraising efforts, replacing UniCredit SpA as financing guarantor. The fund’s involvement may mitigate the risk of enforced losses to Popolare di Vicenza bondholders.

Listing in Cards?

Mediobanca has the option of withdrawing its offer if Italy’s stock exchange denies authorization for a listing, the person with knowledge of its involvement said. Officials will decide whether the IPO constitutes a sufficiently free float for a listing on May 2, two days before the planned start of trading, according to the deal’s terms. A spokesman for Mediobanca declined to comment.

The dearth of demand for the IPO makes “a listing of the bank on the stock exchange highly unlikely at this point,” said Gianluca Ziglio, a strategist at Sunrise Brokers LLP, a derivatives dealer in London. “The lack of large foreign investors is particularly telling of the uncertainties surrounding the operation.”

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