Monte dei Paschi bailout would entail 4.1 billion euro forced debt swap: source

ROME (Reuters) - A state bailout of ailing Italian lender Monte dei Paschi di Siena BMPS.MI would entail a forced conversion of 4.1 billion euros ($4.3 billion) worth of subordinated bonds into shares, a source familiar with the matter said on Friday.

Italy’s third-biggest bank is still attempting to raise 5 billion euros by the end of this month through a voluntary debt-to-equity conversion offer and a share issue, but Italy stands ready to step in as the plan’s chances of success are slim.

If the privately-funded plan falls through, the Rome government would inject 900 million euros to recapitalize the bank while the rest of the money would come from the mandatory debt-to-equity swap, the source said.

Rome is still in talks with the European Commission over how to compensate retail bondholders from losses incurred due to the forced conversion.($1 = 0.9607 euros)

Reporting by Giuseppe Fonte, writing by Valentina Za, editing by Paola Arosio