* Carige CEO says cash call is “ironclad”
* Bank says won’t have enough cash in 12 months if it fails
* Cannot rule out ECB imposing further capital requirements (Recasts adding details)
MILAN/GENOA, Italy, Nov 22 (Reuters) - Italy’s Banca Carige moved to secure its future with the launch of a 560 million euro ($658 million) share issue on Wednesday, saying it would struggle to survive the next year without the cash.
Carige Chief Executive Paolo Fiorentino said the cash call was now “ironclad” after last-minute difficulties with the deal last week rattled Italy’s banking sector, where other mid-sized rivals such as Creval are also preparing to tap markets to be able to shed bad debts.
The European Central Bank (ECB) is stepping up pressure on Italian lenders to offload soured loans. These still account for a quarter of Europe’s total, three years after a harsh recession in the country ended.
Italian banks like Carige have been holding onto them as they can only sell at a loss, but the Genoa-based group must comply by the end of the year with ECB demands that it boosts capital and starts cutting bad loans to avoid being wound down.
Carige said it was also awaiting further feedback from the ECB from inspections this year looking at its business model, the impact of a new accounting rule and, more recently, internal information flows.
But Fiorentino ruled out any further cash calls after the bank said in its offer documents that the ECB may raise the required capital thresholds. The documents said capital levels could also be at risk if it fell behind on its business plan.
Fiorentino said he expected demand for the rights issue to exceed its size, while finance chief Andrea Soro said Carige had commitments from core shareholders and other investors who plan to pay around 360 million euros into the share issue.
“The cash call is ironclad,” Fiorentino, who took over as CEO in June, told a press conference following its launch, later adding: “I rule out any additional capital raising.”
SIGNIFICANT LOSS FORECAST
Carige also forecast a significant loss this year as it will book charges linked to agreed bad loan disposals and layoffs in the fourth quarter.
It said the ECB had flagged weak profitability and limited capacity to absorb potential losses in a preliminary assessment following an annual review of risks and had asked Carige to update its strategy to reduce bad debts by March 30.
“Though the bank took measures to tackle issues highlighted by regulators following inspections, there is no certainty they will be effective,” the bank said.
“Also, it cannot be ruled out that regulators in the future set higher-than-expected capital requirements, making necessary to take further capital strengthening measures.”
Carige is aiming to raise 500 million euros from shareholders and another 60 million euros from holders of its junior debt who have seen it converted into senior-ranking debt at a discount. Credit Suisse, Deutsche Bank and Barclays are to take on any unsold shares.
The new shares have been priced at 0.01 euros each. By 1509 GMT shares in Carige had fallen 6.6 percent to 0.0113 euros, following a relief rally that drove them 53 percent higher on Tuesday.
The rights to buy the new shares traded down 44 percent signalling selling by some of the bank’s shareholders, half of which are small savers who face severe losses after backing two previous cash calls in 2014 and 2015.
The latest stock issue is set to include among Carige’s shareholders debt servicing company Credito Fondiario, which is controlled by investment firm Tages Group and is in talks to buy 1.2 billion euros in bad debts from the bank, and London-based fund Algebris. ($1 = 0.8511 euros) (Additional reporting by Francesca Landini; editing by Alexander Smith)
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