Monte dei Paschi capital talks enter home stretch after Italy vote

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MILAN — Monte dei Paschi di Siena faces a tight schedule to secure anchor shareholders for a share sale of up to 2.5 billion euros ($2.4 billion) after an election break in which investors ended on Monday.

After leading the Conservative alliance to victory in Sunday’s vote, Giorgia Meloni is set to become Italy’s first female prime minister to lead her most right-wing government since World War II.

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Maurizio Leo, senior economic adviser to the Italian leader of the Meloni Brothers, said the MPS was in good hands.

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« We are confident that chief executive Luigi Lovaglio can see through the transaction, » he told Reuters, adding: « He has the experience and he can deliver. »

MPS faces the challenge of raising more than eight times its current market value of 300 million euros, five years after a bailout that provided 8.2 billion euros in capital.

This means that it is unable to offer a deep discount on new stock and will be more valued than its competitors.

State-owned MPS aims to launch the new share issue on October 10, to raise the funds it needs in time to lay off some 3,500 employees using early retirement rules that end after November.

Lovaglio had waived involvement with insurer Axa and asset manager Anima Holding, despite the willingness of MPS’s major business partners to play a role in its recapitalization, sources said.

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Anima being ready to provide up to 200 million euros in cash as part of an enhanced commercial partnership with MPS, the Tuscan bank would probably need an equivalent contribution from French Axa for the operation to materialize, have said two people familiar with the matter.

The state will cover 64% of MPS’s fundraising, but the rest must come from private hands under European Union rules limiting state aid to lenders.

After a standoff that angered some of the eight banks in MPS’s underwriting consortium, Lovaglio finally agreed to meet with senior executives from Anima and Axa in London last week.

But no financial details have yet been confirmed with either party, which means time is running out, especially when it comes to reviewing Anima’s contracts with MPS, said one of the people.

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Unlike Anima, Axa will not modify its « bancassurance » joint venture with MPS, but will simply buy portfolios of insurance contracts, allowing MPS to anticipate future revenues, the sources said.

All interested parties declined to comment.

The banks organizing the sale of shares consider the involvement of leading investors to be fundamental. They can waive an appropriate underwriting commitment if the sale is unlikely to succeed based on investor feedback.

The fundraising is expected to be completed before a new government is formed in late October or early November, with the bid expected to run for three weeks from October 10.

Meanwhile, MPS shares did not trade on Monday after a reverse stock split to pave the way for the capital raise. The Italian stock exchange said after markets closed that it would not allow orders for MPS shares without a price limit. ($1 = 1.0338 euros) (Reporting by Valentina Za in Milan and Giuseppe Fonte in Rome; Editing by Alexander Smith)