November 29, 2016 / 9:00 PM / a year ago

UPDATE 1-Monte dei Paschi pins hopes on anchor investor deal this weekend

(Adds CFO quotes and details)

By Stephen Jewkes

MILAN, Nov 29 (Reuters) - Monte dei Paschi <BMPS.MI > is in a race against time to secure a commitment from a cornerstone investor by the weekend before tapping the market for much-needed funds, CFO Francesco Mele said on Tuesday.

Its shares have been hammered by worries over its ability to execute a 5 billion euros ($5.3 billion) capital raising, with some fund managers saying sentiment could brighten if it finds an anchor investor.

Sources said Qatar Investment Authority was in talks and could inject up to 1 billion euros but wanted to wait until the outcome of a Dec. 4 constitutional referendum to take a final decision.

“We have a number of advanced discussions,” Mele told an investors’ conference call, without mentioning any specific institution.

“If we get to Monday with a good anchor commitment we should be able to complete the transaction successfully,” he said.

The bank launched a voluntary debt-to-equity swap offer on Monday on 4.3 billion euros of subordinated notes.

The debt swap is central to a broader capital boosting plan funded by private investors to keep it afloat, after it fared the worst in European bank stress tests in July.

The chances of success will also hinge on the Dec. 4 vote, which could unseat Matteo Renzi’s government, triggering political uncertainty and scaring off investors.

Mele said it would be up to banks in the underwriting consortium to decide on Monday if the conditions were in place to proceed with the deal.

The Chief Financial Officer, who arrived at the bank in October just after Marco Morelli took the helm as Chief Executive Officer, said European Central Bank approval for the cash call was subject to the lender launching its share sale by the end of the year.

Should the privately-funded plan fail, the state would probably have to launch a precautionary recapitalisation of the bank under conditions set by the European Commission for state aid, he said.

But before the state injected public money, investors would first take a hit, Mele said, adding the European Commission would ask for “burden sharing”, affecting only shareholders and junior bondholders -- a much milder solution than a complete “bail-in”.

Sources told Reuters last week that authorities would apply EU rules with flexibility in case of state aid for Monte dei Paschi to avoid perverse effects on the whole Italian banking system. ($1 = 0.9396 euros) (Additional reporting by Pamela Barbaglia and Paola Arosio; writing by Francesca Landini; Editing by Ruth Pitchford)

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