Paschi Climbs as Investors Meet to Approve Capital Plan

Updated on
  • Shareholders have yet to vote on bank’s capital increase
  • Bank plans to start 4.3 billion-euro debt-swap on Monday

Monte Paschi Capital Plan Goes to Shareholder Vote

Banca Monte dei Paschi di Siena SpA extended gains amid optimism that shareholders will approve the ailing Italian bank’s plan for a vital 5 billion-euro ($5.3 billion) capital increase at a meeting in Siena.

The shares rose 4.1 percent to 23 cents at 5:11 p.m. in Milan trading, after earlier surging as much as 14 percent. Monte Paschi plans to start a 4.3 billion-euro debt-swap on Monday, with an offer period of five days, Chief Executive Officer Marco Morelli said at the extraordinary meeting on Thursday. Shareholders have yet to vote on the capital increase at the gathering.

Marco Morelli

Photographer: Alberto Bernasconi/Bloomberg

Morelli, 54, is seeking to persuade shareholders that the troubled bank can turn a corner by shedding 28 billion euros of bad loans, raising capital and reorganizing its business. As part of the plan, the lender is promoting a voluntary debt-for equity swap and is seeking anchor investors to help reduce the size of a stock sale.

“The plan has no precedent for size and structure in the Italian banking industry,” Morelli told shareholders. “It represents a crucial step for Monte Paschi that would allow the bank to be again among leading Italian financial institutions, with sound capital.”

Investors representing 22.4 percent of the bank’s capital are taking part in the meeting, exceeding the minimum 20 percent needed to vote on the capital increase, according to outgoing Chairman Massimo Tononi. The Italian Treasury, with a 4 percent stake, and Axa SA with 3.2 percent are the biggest shareholders attending the meeting in Siena, Italy.

Shareholders’ approval is the final step to implement the recapitalization after the European Central Bank approved it on Wednesday.

Morelli, who took over in September, is under pressure to reassure investors and stem a slide in shares that has eroded about 80 percent of the bank’s market value this year. That makes it the worst performer on the benchmark FTSE MIB index, which lost 23 percent. The five biggest losers on the index in 2016 are all banks.

“I’m not sure it is the largest securitization deal in the world, but for sure it is the largest non-performing-loan securitization in the world,” Filippo Alloatti, a senior credit analyst at Hermes Investment Management in London, told Guy Johnson and Matt Miller on Bloomberg TV on Thursday. “It’s a complex transaction,” and questions about profitability remain, he said.

Monte Paschi, bailed out twice, has burned through 8 billion euros in investors’ equity since 2014. The bank, burdened by soured debt and losses on derivatives bets gone wrong under previous management, emerged as the most vulnerable lender in a European stress test in July. In the third quarter, the lender had a loss of 1.15 billion euros.

— With assistance by Nicholas Comfort, Matthew Miller, Gaurav Panchal, and Guy Johnson

(Updates with swap-offer period in second paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE