Carige Gets Offer From Apollo to Inject Capital, Buy Bad Loans

  • Apollo proposes to inject 500 million euros of fresh capital
  • Carige to review Apollo's offer after new board installed

Banca Carige SpA received an offer from U.S. investment firm Apollo Management International LLP to shore up its finances and clean up its books in exchange for a stake in the struggling Italian bank.

Apollo outlined the proposal in a letter dated March 23, revising a previous offering submitted in February, the Genoa-based bank said in a statement Tuesday. Apollo is proposing to purchase an unspecified amount of bad loans from the unprofitable bank and inject 500 million euros of a proposed 550 million-euro capital increase.

Carige will review the offer after the shareholders’ meeting scheduled March 31, when a new board will be chosen. A phone call to Apollo’s offices in London requesting comment wasn’t immediately answered.

Carige climbed the most in a month after Il Messaggero reported Apollo’s offer on Saturday. The lender rose as much as 11.3 percent and was up 6.8 percent to 61.2 cents as of 10:45 a.m. in Milan trading, giving the company a market value of 510 million euros. Carige has lost half of its value this year.

Carige was one of two Italian lenders forced to plug a capital deficit that came to light during the ECB’s health check in 2014. Almost two years later, the bank is still struggling to strengthen its balance sheet and restore confidence. The Malacalza family, Carige’s main investor with an 18 percent stake, is proposing to replace the bank’s top management, including CEO Piero Luigi Montani, whose term expires this month.

“We do not expect the new board of directors, which is dominated by the current main shareholder Malacalza, to approve the offer from Apollo, which would be highly dilutive,” Luigi Tramontana, an analyst at Banca Akros who has a buy recommendation on the stock, wrote in a note Tuesday, referring to Messaggero’s report. “We rather see the new management relaunching the bank and looking for an alternative aggregation.”

The European Central bank earlier this month instructed Carige to submit a new funding plan by the end of March and a strategic review by the end of May to restore compliance with supervisory requirements. Carige said March 3 it experienced a drop in deposits and difficult market conditions this year and restated the 2015 net loss to 102 million euros from 45 million euros reported last month.

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