Paschi's Lowest-Ranked Bondholders Ask for $137 Million

Updated on
  • Holders of FRESH bonds seeking twice the market value of notes
  • Italian taxpayers hold 70% of troubled bank after state rescue

Holders of Banca Monte dei Paschi di Siena SpA’s lowest-ranking debt said they want reimbursement equal to twice the market value of the notes.

Owners of 1 billion euros ($1.14 billion) of so-called FRESH bonds are seeking recovery of 120 million euros in the form of new notes paying interest of at least 6 percent, according to a document dated July 10 that was seen by Bloomberg.

A spokesman for Siena-based Monte Paschi declined to comment. The notes, which haven’t paid coupons since 2012, are quoted at 6 cents on the euro compared with almost 20 cents in November, according to data compiled by Bloomberg. Last year Monte Paschi offered holders of FRESH to swap the notes for equity at 23.2 percent of their face value, as part of a rescue deal that collapsed the following month.

Monte Paschi turned to Italy for help after it failed to raise funding from investors in December. Shareholders and the majority of junior bondholders were hit as a condition of the rescue, with Italian taxpayers taking about 70 percent ownership of the bank and higher-ranked junior bondholders being forced to swap their notes for a minority stake.

The government decree on the state’s rescue of Monte Paschi may wipe out the value of the bonds by converting them into equity. A former decree approved in December detailing the treatment of subordinated bonds amid Monte Paschi’s precautionary recapitalization didn’t mention this specific bond, raising uncertainty regarding the terms of its conversion.

Monte Paschi to Reduce 5,500 Jobs, Assets in Rescue Plan

Riccardo Quagliana, general counsel at Monte Paschi, said during a conference call with analysts last month that before taking any specific action on the FRESH bonds, “we are still waiting for the wording that will be issued in the new decree the government is expected to issue by the end of July.”

The July 10 document, in which the holders seek permission to appoint a Luxembourg-based lawyer to represent them, also suggests the bank pay costs to the group and its advisers equivalent to 1.5 percent of the face value of their notes. FRESH bondholders will meet July 26 to vote on the proposal and name a representative to make a formal offer to the bank, according to the document.

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