February 27, 2019 / 11:44 AM / 22 days ago

UPDATE 2-Italy's Carige faces April deadline to fill 630 mln euro capital gap

* ECB to decide in April bank’s fate in absence of binding bids

* Government can step in under emergency decree

* Capital needs rose due to aggressive bad loan clean-up (Recasts after press conference)

By Valentina Za

GENOA, Italy Feb 27 (Reuters) - Temporary administrators of Banca Carige said they had to find a buyer by April for the Italian bank, after unveiling a 630 million euro ($718 million) capital shortfall.

The European Central Bank on Jan. 2 placed Italy’s 10th largest bank under special administration - its first ever such move - after the top investor in the Genoa-based lender blocked a 400 million euro cash call.

Announcing a restructuring plan that envisaged 1,000 job cuts, the special administrators said on Wednesday Carige’s capital needs had increased partly due to a more ambitious bad loan clean-up.

Carige reported a 273 million euro loss for 2018 after writing down loans to enable it to make disposals, including a 1.9 billion euro bad loan sale agreed with state-owned debt recovery specialist SGA.

SGA’s offer will stand for several months so as to give a number of funds and banks currently studying Carige the option of bidding for the cleaned-up bank or buy the bank with the bad loans earmarked for SGA, Commissioner Fabio Innocenzi said.

“We’re in the process of setting a date in April in accordance with supervisors ... to receive binding bids,” he told a press conference, adding the ECB would decide Carige’s future if an offer failed to materialise.

“We’re working to avoid a state intervention ... in life it’s hard to rule anything out,” Commissioner Pietro Modiano said.


Bankers say Carige has little allure for buyers given its exposure to the depressed economy of the northwestern Liguria region and after selling off its more profitable assets in recent years to stay afloat.

Under a January emergency decree, Italy’s government can buy up to 1 billion euros worth of Carige’s shares.

A state rescue is, however, an unpalatable option for the ruling right-wing League and anti-establishment 5 Star Movement.

Both parties lashed out at the previous centre-left administration for taking over Monte dei Paschi di Siena and bankrolling Intesa Sanpaolo’s rescue of two regional lenders.

Rome has already provided a state guarantee on 2 billion euros in debt issued by Carige to beef up a key liquidity ratio that fell below the required threshold in 2018.

Before the government stepped in, Italian banks had propped up Carige by buying a 320 million euro hybrid bond in November which the lender was unable to place on the market to boost its second-tier capital.

The bond could have been repaid in shares if the December cash call had gone through. Carige said on Wednesday it would use part of the proceeds from a new cash call to repay the bond, which carries a 16 percent coupon.

It said it also needed to cover 120 million euros in loan writedowns this year as it works to reduce its bad debt burden to 6.3 percent of total lending from 22 percent at end-of 2018.

Bad loans have caused Carige to pile up 1.6 billion euros in losses since 2014, forcing it to raise 2.2 billion euros in a string of cash calls over the same period.

$1 = 0.8775 euros) (Editing by Mark Potter and Emelia Sithole-Matarise)

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