Doubts about whether Monte dei Paschi di Siena would find buyers for a 5 billion euro ($5.3 billion) recapitalisation plan drove shares in the Italian bank down more than 7 percent on Friday. Under the plan approved by shareholders of Italy's oldest bank, the stock would go on sale around December 7 or 8, just after a referendum vote on a constitutional reform on December 4 that may rattle financial markets by prompting Italy's government to resign.
Investors worried about rising political risks in Italy have failed to give the plan their firm backing so far and some fear Monte dei Paschi may be unable to launch the offer if voters reject Prime Minister Matteo Renzi's reform plan. Monte dei Paschi could then need state support to avoid being wound down, in a fresh blow to Italy's battered banks.
To reduce the size of the proposed share sale, Monte dei Paschi is planning a debt-to-equity conversion offer which it estimates could raise 1 billion euros. The bond swap is expected to get consent from market regulator Consob during the weekend, to run from Monday to Friday. "There is high uncertainty on investors' reception and take-up of the offer, partly because bondholders will need to make up their mind before knowing the referendum's outcome and its impact on Italy's stock market," ICBPI's analyst Luca Comi said in a note.
The Italian treasury, currently the bank's biggest shareholder with a 4 percent stake, will take part in the cash call, Economy Minister Pier Carlo Padoan said on Friday. "The (bank's rescue) plan works," he said in an interview on Sky television, adding he did not think investors would walk away should Renzi's government fall after the referendum.
However, even Monte dei Paschi's long-standing investor, the Monte dei Paschi banking foundation which used to control it and now has a 0.7 percent stake, said it would wait until after the vote before deciding whether to buy new shares. Newly-appointed Chairman Alessandro Falciai, also a shareholder with just under 2 percent, said he had not decided yet what to do.
Monte dei Paschi's new CEO Marco Morelli has been sounding out more than 280 investors in a three-week long roadshow, without securing a firm commitment so far. Among them is the Qatar Investment Authority, which Monte dei Paschi hopes could put around 1 billion euros in the cash call, sources say. Monte dei Paschi managed to gather shareholders representing 22.4 percent of its capital at its Thursday meeting, just above a required 20 percent quorum, to approve its plan. "Given doubts over whether the quorum could be reached, shareholder approval of the recapitalisation was a crucial passage given the plan's tight timeline," Comi said. The bank is seeking to raise the money it needs by year end after emerging as Europe's weakest lender in industry stress tests in July.
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