© Reuters. The logo of the bank Monte dei Paschi di Siena is seen at the entrance to the bank in Rome, Italy August 16, 2018. REUTERS / Max Rossi
By Pamela Barbaglia and Valentina Za
LONDON/MILAN (Reuters) -Monte dei Paschi (MPS) Chief Executive Luigi Lovaglio is increasingly under pressure to secure support from the state-owned bank’s main trading partners for a capital raise of up to 2 ,5 billion euros ($2.5 billion), three sources close to the matter said.
Lovaglio has refused to enter into talks with AXA and Anima over a share sale despite interest from the two partners to invest in MPS as part of fortified trade alliances, sources said. anonymously said.
Closer ties could hinder MPS’s search for a future merger partner as the state seeks to cut its 64% stake. However, the banks that issue the shares have long recognized the need for platform investors, the sources said.
At current market prices, banks face the daunting task of placing new shares that value MPS at a much more expensive price than peers like UniCredit.
Following informal meetings in London with top AXA and Anima executives on Thursday, first reported by Bloomberg News, Lovaglio has agreed to participate in the long-delayed negotiations. next week, two of the sources added that it was unclear whether this would lead to this. to an agreement.
Lovaglio has repeatedly said discussions around the cash call must be separate from any revision of commercial agreements MPS has made with asset manager Anima and insurer AXA. .
He attempted to raise funds without their involvement in mid-November to cut costs through an expensive early retirement program for employees.
However, volatile markets amid recession fears make it difficult for the bank to attract buyers for a bank worth just 300 million euros after burning through 25 billion euros of investors’ money since then. from the global financial crisis.
One of the sources said Lovaglio’s reluctance to get involved with AXA and Anima has led several banks to have signed preliminary pledges to recover unsold shares.
The timing to revise the partnership is now tight, MPS plans to launch a cash call in mid-October to secure funding by mid-November.
Anima can contribute up to 250 million euros to MPS’s capital raise, when an upfront payment for improved partnership terms is included, a source previously said.
Led by Bank of America (NYSE:): Citigroup (NYSE:), Credit Suisse, and Mediobanca (OTC:), the group of banks handling the capital raise, may abandon the deal if the response from investors is negative.
A person close to the group said that the banks have not yet had a firm commitment from any investors.
Even investors with a longstanding relationship with Lovaglio, such as French businessman Denis Dumont, want to wait and see the results of Italy’s general election on Sunday, said another person close to the matter. said.
MPS must secure private funds to avoid violating European Union rules on state aid. The state is allowed to pay 64% of the capital MPS raised based on the size of the shares it acquired after the 2017 bailout.
Italian rules that expire after November – allowing people to retire seven years before pension age – are forcing MPS to raise cash at a time when investors are waiting to gauge the depth of their lives expected recession in Europe. (1 dollar = 1.0164 euros)
(Reporting Pamela Barbaglia in London and Valentina Za in Milan; Editing by Paul Simao)