By Valentina Za and Giuseppe Fonte
MILAN (Reuters) -Monte dei Paschi di Siena is closing in on a guarantee contract with a group of banks which will enable its new share issue to be approved at a board meeting later on Tuesday, three people with knowledge of the matter said.
An afternoon board meeting of MPS is due to set the terms of a new share sale to raise up to 2.5 billion euros ($2.4 billion), the state-owned bank’s seventh in 14 years after it raised 8 billion euros from taxpayers and investors to avoid liquidation in 2017.
Speaking on condition of anonymity because discussions are private, the sources said early on Tuesday the signing of the contract with the banks would only require “a few more hours”.
MPS needs yet more cash to lay off 3,500 staff through costly early retirements by the end of the year and also to offset a potential capital shortfall of up to 500 million euros.
One of the sources said it was “basically a matter of bureaucracy”, meaning that all the documents that were the result of the “enormous work” done so far had to be gathered.
Rocky markets and the size of the cash call, equivalent to more than 10 times MPS’ current market value, have complicated talks with the eight banks that had made a preliminary commitment to underwrite the issue.
The new shares will value MPS above healthier peers, exposing underwriters to likely losses on any shares left on their books, bankers and analysts say.
Further irking lenders, MPS Chief Executive Luigi Lovaglio has stalled on an offer by asset manager Anima Holding to buy into the issue as part of a new commercial agreement.
The banks have long seen the share sale as too risky to bring to the market without a pre-committed core of investors.
Lovaglio can at least count on the backing of France’s AXA, MPS’ partner in an insurance joint-venture, which sources say has offered to put in at least 100 million euros.
Like other shareholders, Italy will see the value of its stake wiped out, entailing a 5.4 billion euro loss.
Based on its 64% stake in the lender, Rome can pump up to another 1.6 billion euros into MPS to cover the new issue, but the rest must come from private hands due to European Union rules on state aid to lenders.
($1 = 1.0302 euros)
(Reporting by Valentina Za in Milan and Giuseppe Fonte in Rome; Editing by Keith Weir and Alexander Smith)
