| SIENA, Italy
SIENA, Italy Dec 28 The top investor in Banca
Monte dei Paschi di Siena looked set to force a delay
in a 3-billion-euro ($4 billion) capital increase the Italian
lender needs to carry out to reimburse state aid and avert
The management of the world's oldest bank, led by Chairman
Alessandro Profumo and CEO Fabrizio Viola, wants to launch the
rights issue as early as January and has asked shareholders to
approve it this week.
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 cash call, 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.
A shareholder meeting got under way on Saturday after it was
rescheduled because not enough investors showed up on Friday.
Thanks to its 33.5 percent holding, big enough to veto any
decision, the foundation can force the bank to postpone the
Tensions ran high ahead of the meeting, with sources close
to the matter saying Profumo could quit if the capital increase
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.
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 instead 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 said last week that a postponement would cause great
uncertainty and could force the bank to be
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.