Monte Paschi's top investor may vote against cash call

Dec 06, 2013, 12:51 PM EST
REUTERS/Stefano Rellandini

By Stefano Bernabei and Paola Arosio

MILAN/ROME, Dec 6 (Reuters) - The top investor in Italy's troubled lender Monte dei Paschi di Siena is thinking of voting against a vital 3 billion euro rights issue due to be launched in January to gain time to sell down its own stake, three sources close to the matter said.

The Monte dei Paschi foundation has a 33.5 percent stake in the bank, Italy's third largest, a big enough holding to block any unwanted decision at a December 27 extraordinary shareholder meeting called to approve the capital increase.

The foundation has been seeking to sell part or all of its stake to pay back around 350 million euros ($479 million) in debt, but has so far failed to find a buyer and is keen to win more time.

Monte dei Paschi (BMPS.MI), by contrast, wants to launch the capital increase as soon as possible and a preliminary commitment by a pool of banks to underwrite the cash call - whose size is higher than the lender's market capitalization - expires at the end of January.

If no capital increase is launched by that date, the pre-underwriting agreement with the banks would end and Monte dei Paschi would have to restart negotiations to form a new consortium guaranteeing the rights issue, the bank has said.

"They (the foundation) have said they are inclined to vote against, they hope things may improve later," one source close to the matter said on Friday.

A second source, also close to the matter, said the foundation was not opposed to the capital increase but would likely use its veto power at the shareholder meeting unless it could find a buyer for its shares before then.

The foundation declined to comment. It said on December 4 it had not started selling its stake in the bank and had not yet decided whether to back the capital increase at the December meeting.

Shares in Monte Paschi have lost nearly 13 percent this week with traders citing uncertainty over the foundation's moves and the prospect for the rights issue. By 1611 GMT on Friday they were down 2.9 percent to 0.1632 euros.

"There is uncertainty over whether the capital hike will go through and the stock is likely to fall more as we approach the December 27 date," a Milan-based trader said.

FOUNDATION'S OPTIONS LIMITED

The foundation's options are limited. If Monte dei Paschi's shares fall further to around 0.12 euros, its stake in the lender could be seized by the creditor banks, some of which are also part of the pool of 10 banks, led by UBS (UBSN.VX), ready to guarantee the capital increase.

"Several times we have told the foundation to sell its shares and not to wait until the stock price was under pressure," said another source close to the foundation's creditors.

With time running out to find a compromise between the bank and its largest shareholder, the sources said there were no talks under way to renegotiate the terms of the foundation's debts - contrary to a report in the Italian press.

The cash call is required as part of a restructuring demanded by the European Commission for approving state aid, which Monte dei Paschi received earlier this year.

The bailout kept the bank, which was hit hard by the euro zone debt crisis and is on track to post its third straight annual loss, afloat by plugging a capital shortfall.

The bank is also at the center of a judicial probe over its costly acquisition of smaller rival Antonveneta in 2007 and loss-making derivatives trades it made in the deal's aftermath. ($1 = 0.7308 euros)

(Corrects paragraph 2 to say it is Italy's third largest bank, not largest)

(Writing by Silvia Aloisi; Editing by Anthony Barker)

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