Pop. Vicenza Junior Bonds Plunge on Renewed Capital Concerns

  • Notes fall to five-month low after potential shortfall report
  • Lender received bailout from industry-backed fund in April

Banca Popolare di Vicenza SpA’s junior bonds tumbled, erasing gains since the Italian lender won a bail-out in April, because of renewed investor concerns about capital levels.

The bank’s 200 million euros ($224 million) of 9.5 percent subordinated notes due in September 2025 fell four cents on the euro to 69 cents, the lowest since April 5, according to data compiled by Bloomberg. Junior notes issued by Veneto Banca SpA, another lender owned by industry-rescue fund Atlante, also slumped.

Both lenders’ bonds have plunged since the Il Mattino di Padova newspaper reported on Sept. 11, citing unidentified people, that Popolare di Vicenza may face a 500-million euro capital shortfall after the disposal of bad loans. That could lead to losses being imposed on junior bondholders because Atlante may not provide further cash, according to Markus Ratzinger, a Bologna, Italy-based partner at Anthilia Capital Partners.

“If the banks need more money, it’s not certain to be forthcoming,” said Ratzinger, who manages about 60 million euros of financial-sector debt. “There are so many ways that Atlante could spend money.” Ratzinger holds senior Veneto Banca bonds, which he said were unlikely to be bailed in.

An official at Vicenza, Italy-based Popolare di Vicenza declined to comment on the report. Calls to Veneto Banca’s media relations department weren’t answered.

Atlante Fund

Both banks are owned by Atlante following a 2.5 billion-euro emergency cash call earlier this year. The fund originally intended to spend no more than 3 billion euros on bank recapitalizations, according to an April presentation by Quaestio, its asset manager. A second Atlante fund was subsequently set up, partly to buy 1.6 billion euros of a securitization of bad loans due to be sold by Banca Monte dei Paschi di Siena SpA later this year.

Popolare di Vicenza made a loss of about 800 million euros in the first half of the year, it reported last week. Its common equity Tier 1 ratio, a key capital measure, was 10.8 percent, compared with the 10.25 percent required by the European Central Bank.

Veneto Banca’s 200 million euros of 9.5 percent bonds due December 2025 dropped to 70 cents, the lowest in more than five months.

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