Monte Paschi shares up on speculation about debt deal

MILAN Fri Dec 20, 2013 8:21am EST

The entrance of Monte Dei Paschi bank headquarters is pictured in Siena January 24, 2013. REUTERS/Stefano Rellandini

The entrance of Monte Dei Paschi bank headquarters is pictured in Siena January 24, 2013.

Credit: Reuters/Stefano Rellandini

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MILAN (Reuters) - Shares in Monte dei Paschi di Siena (BMPS.MI) rose on Friday on speculation its top shareholder might strike a deal with other banking foundations to pay back its debt, helping resolve a clash with the bank over the timing of a capital increase.

Monte dei Paschi is planning to launch a 3-billion euro rights issue in January as part of a restructuring demanded by the European Commission for approving a 4.1 billion euro state bailout Monte dei Paschi received earlier this year.

Under the deal with the EU, if the rights issue is not carried out in 2014, Italy's third largest bank will have to convert the state aid into shares issued to the treasury.

But its main shareholder, the Monte dei Paschi foundation, is threatening to scupper the plan by voting against it at a December 27 shareholder meeting.

The foundation has said it needs more time to sell part or all of its 33.5 stake in the bank to pay back its own 340 million euros of debts which it ran up trying to keep control of the bank. It was the cash call delayed until at least May.

Sources close to the matter told Reuters on Friday one option being considered to break the impasse was a share swap deal between the Monte dei Paschi foundation and other banking foundations that have holdings in lenders UniCredit (CRDI.MI) and Intesa Sanpaolo (ISP.MI).

This would allow the Monte dei Paschi foundation to get small stakes in stronger banks which it could easily sell on the market in exchange for the bulk of its Monte dei Paschi stake.

However, the sources said such a deal would be "extremely difficult" and the foundations involved were skeptical about its feasibility.

The Monte dei Paschi foundation on Tuesday said no talks were under way with other foundations about a possible share swap or sale.

Monte dei Paschi's shares, which have lost nearly 30 percent of their value in the past month due to the uncertainty about the timing of the capital increase, rose 5 percent by 7:29 a.m. ET.

"The market is betting on the possibility that other banking foundations are ready to take a relevant stake of Monte dei Paschi from its top shareholder, resolving the clash on the capital hike," a Milan-based trader said.

A report in financial daily Milano Finanza said on Friday that under a possible deal, the Monte dei Paschi foundation could swap a 20 percent stake in the bank for a 0.38 percent stake in UniCredit and a 0.9 percent holding in Intesa Sanpaolo in a transaction with Cariplo, Cariverona and Compagnia di Sanpaolo.

"The idea (of a share swap) is on the table but is extremely difficult," said a source close to the situation.

"There has been no progress. And I can't see this working," said a second source with direct knowledge of the matter.

Fondazione Monte dei Paschi and the Cariplo and Compagnia di Sanpaolo foundations all declined to comment on Friday. The Cariverona foundation was not immediately available for comment.

(Reporting by Paola Arosio, Stefano Bernabei, Gianni Montani; and Elisa Anzolin, writing by Silvia Aloisi; Editing by Elaine Hardcastle)

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