| SIENA, Italy
SIENA, Italy Dec 26 The top investor in Banca
Monte dei Paschi di Siena looked set to push back to
mid-2014 a 3-billion-euro ($4 billion) capital increase the
Italian lender needs to carry out to reimburse state aid and
The bank's management, led by Chairman Alessandro Profumo
and CEO Fabrizio Viola, would like to launch the rights issue as
early as January and has asked shareholders to approve it on
But the top shareholder - a not-for-profit foundation with
close ties to Siena politicians - is determined to delay the
cash call until May or later to win more time to sell down its
stake in the bank and repay debt.
The rights issue, along with a tough restructuring plan, is
among the conditions imposed by the European Commission for
approving a 4.1 billion euro state bailout that Monte dei Paschi
received earlier this year.
The size of the capital increase is higher than the lender's
stock market value of just over 2 billion euros and the
operation is regarded as risky as the bank was hit hard by the
economic crisis and a derivatives scandal.
The Monte dei Paschi foundation will likely use the full
weight of its 33.5 percent stake - big enough to block any
unwanted decision at Friday's extraordinary shareholder meeting
- by voting against a January cash call.
Saddled with around 340 million euros of debt, the
foundation is looking for a buyer for all or part of its Monte
Paschi stake to pay back creditors.
It fears that a cash call next month would massively dilute
its holding and leave it with virtually nothing to sell.
The bank's management wants to tap investors for cash as soon
as possible and has secured a pool of banks to guarantee the
share issue if it is launched before end-January.
Profumo, who bankers close to the situation say has
threatened to resign if the capital increase is delayed, said
last week that a postponement would cause great uncertainty and
could force the bank to be nationalised.
One specific concern is that Europe-wide health checks next
year could force several other European lenders to raise
capital, meaning Monte dei Paschi could find itself in a crowded
market if it waits too long.
Under the agreement with the European Commission, if the
Tuscan lender cannot complete the capital increase by the end of
2014 it will have to convert state loans it received in the
bailout into shares issued to the Italian treasury.
The bank, which is cutting 8,000 jobs and shutting 550
branches as part of its turnaround plan, is hoping instead to
pay back the bulk of the state aid through the cash call. It
said a delay would cost it at least 120 million euros in
Monte Paschi was kept afloat by the bailout which plugged a
capital shortfall that arose after the bank was hammered by the
euro zone debt crisis and loss-making derivatives trades.
It is on track to post its third straight annual loss after
losing nearly 8 billion euros over 2011 and 2012.
(Editing by Anthony Barker)