Paschi Backer Has Doubts Over Loan Terms, Threatening Plan

Updated on
  • Recapitalization plan can’t proceed without Atlante owner
  • Bridge Loan is part of plan to sell off Monte Paschi bad debt

Monte Paschi Plan Threatened by Loan Term Doubts

A key backer of Banca Monte dei Paschi di Siena SpA’s recapitalization has voiced serious concerns about some of the terms, possibly jeopardizing the bank’s plan to raise funds from private investors.

Quaestio Capital Management, which runs the Atlante bank-rescue fund planned, to take part in the securitization of 28 billion euros ($29 billion) of troubled loans as part of Monte Paschi’s three-stage recapitalization. Quaestio expressed “strong reservations” regarding the terms of a senior bridge loan that’s part of the transaction, the Siena, Italy-based bank said in a statement on Monday. If the bank can’t resolve the matter, the capital increase can’t be completed under the terms agreed to with the European Central Bank, according to the statement.

“It’s a complex deal, with a lot of moving parts, and Atlante is one of the key players,” said Francesco Castelli, a London-based money manager at Banor Capital. “If it pulls out, the whole deal is over.”

Monte Paschi’s plan to raise 5 billion euros has three interlocking pieces: a debt-for-equity swap, a stock offering and the disposal of the soured loans. The stock offering and an expanded swap are proceeding this week as the bank tries to complete the plan by Dec. 31 and avoid a government rescue that would impose losses on bondholders.

Pressure to Agree

“My reading is that the banks and its advisers are putting pressure on Quaestio to agree on the terms of the deal,” Fabrizio Spagna, managing director at Axia Financial Research in Padua, Italy, said by phone. “I think the real key is the appetite for Paschi’s shares. That I don’t see at all.”

The Atlante funds were orchestrated by the Italian government to help with the recapitalization and purchase of bad loans from the country’s struggling banks. Quaestio used funds raised from institutions including state lender Cassa Depositi e Prestiti SpA, UniCredit SpA and Intesa Sanpaolo SpA to rescue Veneto Banca and Banca Popolare di Vicenza after investors balked at their capital increases. Atlante was also expected to handle the mezzanine tranches of Monte Paschi’s non-performing loan pile totaling about 1.5 billion euros.

The Italian government is preparing a plan to inject as much as 15 billion euros into Italian banks should Monte Paschi’s fundraising fail, according to a person with knowledge of the matter. The Treasury also plans to participate in the share sale, which may increase its 4 percent holding, the person said, asking not be identified because the plan isn’t public.

A government decree would earmark resources for intervention in bank recapitalizations, which may be applied to lenders including Veneto Banca, Popolare di Vicenza and Banca Carige SpA, said the person. He added that the decree may contain other “fine-tuning” measures.

The share offer ends on Wednesday for retail investors and Thursday for institutions. The bank is also looking for a possible anchor investor to take a large chunk of the shares being offered. Monte Paschi expanded and extended its debt-for-equity swap after raising 1.02 billion euros initially.

— With assistance by Luca Casiraghi, and Tommaso Ebhardt

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