MILAN Bailed-out lender Banca Monte dei Paschi di Siena (BMPS.MI) priced its upcoming 5-billion euro (6.83 billion dollars) rights issue at a big discount as it seeks to lure investors for a vital cash call meant to avert nationalization.
In a statement late on Thursday, the Tuscan lender said it would offer new shares in the bank at 1 euro each, or a 35.5 percent discount to the theoretical share price accounting for the dilution of the new shares.
The discount was at the high end of analyst expectations and well above a 21-percent discount offered by Deutsche Bank (DBKGn.DE) on its own rights issue, which was also priced on Thursday.
Recent capital hikes by Commerzbank (CBKG.DE), Sabadell (SABE.MC) and Barclays (BARC.L) were priced at a discount of 33-38 percent.
Bankers and analysts have said the Tuscan lender had to offer a big discount because of the sheer size of the capital increase - more than 2 billion euros higher than the bank's current market value of 2.9 billion euros.
Monte dei Paschi's shares, which have rallied in the past few days, closed at 25.09 euros on Thursday. That means the new shares will be offered at a 96-percent discount to the market price.
Monte dei Paschi is one of nine Italian banks under European scrutiny to raise funds on the market in preparation for a Europe-wide health check of lenders.
Together, they have announced plans to raise a combined 10.8 billion euros. The Tuscan bank's fundraising starts on Monday.
The bank, Italy's third largest, was forced to raise the size of the share sale to 5 billion euros from the 3 billion euros previously penciled in to help it absorb a hit on its finances it expects from the European review of banks' assets.
Monte dei Paschi, which has one of the highest percentages of soured loans among Italian banks, was hit hard by the euro-zone debt crisis and by a scandal over loss-making derivative trades. It had to request 4.1 billion euros in state aid last year.
The bank is cutting 8,000 jobs and shutting 550 branches as part of a restructuring plan agreed with the European Commission and plans to return to profit in 2015. It has lost more than 8 billion euros over the past three years.
The fundraising will allow the bank to honor its pledge to pay back 3 billion euros of the state bailout this year. The remainder is due to be reimbursed by 2017.
Two bankers familiar with the situation have told Reuters the extra cash would also help Monte dei Paschi increase its reserves against loans turning sour.
The bank's financial woes have led to a major overhaul of its shareholder base. Its former controlling shareholder, the Monte dei Paschi foundation, has gradually cut its stake to just 2.5 percent, and the lender's main investors now include BlackRock (BLK.N) and Latin American investors Fintech and BTG Pactual.
(Reporting by Silvia Aloisi; editing by Jason Neely)