Italy’s MPS scrambles to secure share issuance commitments

  • Plans to sign a subscription contract on Wednesday evening
  • Underwriters refusing to commit without investor support
  • MPS against the clock to collect the necessary documents

MILAN, Oct 12 (Reuters) – Monte dei Paschi di Siena (BMPS.MI) was rushing on Wednesday to secure investor commitments for its 2.5 billion euro ($2.4 billion) share issue. ) so that it can get a backstop from banks for any unsold stock, three people familiar with the matter said.

While the markets are seized by fears of recession, conflict in Ukraine, inflation and rising rates, the group of banks which was to subscribe to the sale of MPS refused to take the risk without being reassured on the amount shares they might have left.

Five years after an 8.2 billion euro ($8 billion) bailout that returned its 64% stake to the state, MPS plans to raise additional funds to lay off staff and bolster capital.

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Italian taxpayers will provide up to €1.6 billion, while the rest must come from private investors to comply with EU state aid rules.

The group of eight banks that are to underwrite the MPS issue are only willing to back a third of the €900 million private share of the capital raising, one of the sources said.

They demanded written pledges from investors for an amount roughly equivalent to half the overall figure, accepting unwritten pledges for the remainder to reach two-thirds of the total, the source added.

MPS CEO Luigi Lovaglio had until recently failed to produce the written commitments, sparking a race in recent days to get all the necessary documents signed.

MPS and the banks expect to be able to reach an agreement on the underwriting contract later on Wednesday, although sources have not previously ruled out that preparations will not take until Thursday.

The Tuscan bank has so far secured support from its insurer partner AXA (AXAF.PA), local banking foundations and asset manager Anima Holding (ANIM.MI).

The failure to secure an underwriting contract on Tuesday prompted the sale of the bank’s riskier junior bonds, which have seen their prices fall to around half their face value, as MPS may have to resort to a swap of debts against shares.

As of 10:22 GMT, the September 2030 Tier 2 bond yield stood at 34.72% on the Tradeweb platform, down from 32.93% on Tuesday, but below a session high of 36.72 %.

A January 2030 bond returned 41.42% after rising to 45.44% from 39.95% at the close on Tuesday.

($1 = 1.0303 euros)

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Additional reporting by Sara Rossi in Milan; Editing by Agnieszka Flak and Alexander Smith

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