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UPDATE 2-Italian bank Carige risks showdown with top investor over cash call
February 21, 2014 / 2:31 PM / in 4 years

UPDATE 2-Italian bank Carige risks showdown with top investor over cash call

* Bank must plug 800 mln-euro capital shortfall

* Carige said on Thursday it plans cash call for that amount

* Top investor is cash-strapped banking foundation

* Foundation shareholder needs time to sell down stake (Adds comments)

By Andrea Mandala

MILAN, Feb 21 (Reuters) - Italian lender Banca Carige’s decision to press ahead with a share issue risks a showdown with its majority owner, a cash-strapped banking foundation which had hoped to delay the cash call of up to 800 million euros ($1.1 billion).

Carige joined a clutch of small and mid-sized banks - Monte dei Paschi di Siena, Banco Popolare, Popolare Milano and Popolare di Vicenza - set to raise a total 7 billion euros in the next few months to absorb rising bad debts.

Carige was expected to resort to a capital increase. It had raised less than 100 million euros from assets it put up for sale a year ago in an effort to limit the size of the fund-raising.

But the bank needs the backing of its top shareholder which, according to a source close to the matter, recently wrote a letter to Carige’s board urging that it bide its time on the capital increase. The foundation does not have the money to take part in a cash call, so its stake could be massively diluted.

With a 46 percent stake, the Carige foundation has a big enough holding to upset the bank’s plans - a situation similar to that of Monte dei Paschi, whose own foundation shareholder forced a delay in a vital 3-billion euro rights issue.

Two sources close to the matter said on Friday the steering committee of the foundation would meet on Monday to assess options, including seeking shareholder backing for a delay of the rights issue.

The board has a mandate from shareholders to carry out the rights issue by the end of March. The sources said the foundation may ask the board to call an extraordinary shareholder meeting in order to push forward that deadline.

“It’s a possibility,” one of the two sources said.

Earlier on Friday, a third source close to the situation had said: “The hope is to avoid a showdown, possibly through the search of a friendly investor that could buy part of the foundation’s stake.”

The foundation declined to comment. Banca Akros analyst Luigi Tramontana said it expected the not-for-profit entity to try to stop a swift implementation of the capital increase.

Carige, one of 15 Italian lenders to be scrutinised by the European Central Bank, has weak core capital at 5.8 percent, well below the 8 percent minimum requirement set by the European Central Bank in its review that started last November.

The Bank of Italy has carried out a detailed inspection of Carige as part of a sector audit and said in a confidential report seen by Reuters in September that Carige may need more than 800 million euros to repair its balance sheet.

Carige has recently overhauled its entire board and in November appointed Piero Montani, formerly at Popolare di Milano, as chief executive with a mandate to turn the lender around.

Another mid-sized bank, Veneto Banca, is also considering a 500 million euro rights issue, a spokeswoman said on Friday. ($1 = 0.7293 euros) ($1 = 0.7293 euros) (Writing by Silvia Aloisi; Editing by Larry King)

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