UPDATE 1-Shares in Italy's Monte Paschi fall as capital hike looms
MILAN Nov 26 (Reuters) - Italian lender Monte dei Paschi di Siena is expected to approve on Tuesday a 3 billion euro ($4.05 billion) capital increase to be launched at the beginning of next year at a price substantially lower than the current value of its shares.
Shares in the lender fell more than 10 percent, extending losses from the previous session when the stock fell 7.5 percent, as uncertainty rose over whether the bank would manage to carry out the cash call and boost its depleted capital base.
"Investors are selling ahead of the announcement of details on the timing and the price of the cash call as they expect a strong dilution effect from it," said Vincenzo Longo, market strategist at IG.
The stock was down 8.23 percent at 0.1795 euros by 1003 GMT after being suspended from trading two times.
The troubled lender said it would hold a board meeting on Tuesday to discuss "capital operations", without adding details. The bank aims to launch the rights issue as early as January, four sources close to the matter said on Monday.
The capital increase, part of a restructuring plan demanded by the European Commission to give its approval to a 4.1 billion euro state bailout the lender received this year, will strongly dilute the bank's shareholders, analysts said.
"The issue price for the new shares could be around 0.05 euros," said Italian broker Equita.
But the picture for the lender is further complicated by the fact that its top shareholder, a charitable foundation with links to local politicians, is also trying to sell down its stake to pay back 350 million euros of debt.
The foundation has said a January capital increase would be too early, asking for more time to find a buyer for part or all of its 33.5 percent holding.
"The fact that the bank is accelerating on the capital hike even if the foundation will be strongly diluted is something that adds uncertainty to the move," Longo said.
The foundation still has a big enough holding to block any unwanted move at a shareholder meeting.
At the same time, bankers close to the matter say it should sell quickly because the looming capital increase will put more pressure on the share price, raising the prospect that its entire stake in the lender could be seized by creditor banks. ($1 = 0.7404 euros) (Reporting by Francesca Landini; Editing by Louise Heavens)
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