Italy's MPS to launch share sale after banks give blessing



*

Share sale to be launched on Monday

*

MPS clinched final bank support early Thursday

*

France's AXA top contributor with up to 200 mln euros

*

Funds needed in part to pay for early retirement scheme

(Updates AXA's contribution in paragraph 11)

By Valentina Za and Giuseppe Fonte

MILAN, Oct 13 (Reuters) - Italy's Monte dei Paschi di Siena (MPS) BMPS.MI will brave rocky markets next week as it seeks to raise up to 2.5 billion euros ($2.4 billion) in a share sale, after managing on Thursday to clinch support from a group of banks.

MPS needs more cash to lay off 3,500 staff through a costly early retirement scheme and to bolster capital only five years after an 8.2 billion euro bailout handed the state majority control of the bank.

The biggest private employer in Tuscany, an area which is a historic bulwark of Italy's centre-left, MPS has close ties with many regional businesses in the fashion and tourism industries.

The bank is betting on rising interest rates and savings from the job cuts to boost profits under Chief Executive Luigi Lovaglio who took the role in February.

Deemed too big to fail, MPS has been at the heart of Italy's banking woes since an ill-fated acquisition on the eve of the 2008-2009 global financial crisis.

It struggled to secure underwriters for its seventh cash call in 14 years, forcing it to race until the very last minute to gather advance commitments from investors to limit risks for the banking consortium.

With only six out of eight banks on board late on Wednesday, CEO Lovaglio and finance chief Andrea Maffezzoni worked through the night with lenders to seal the final backing.

Bank of America BAC.N , Citigroup C.N , Credit Suisse CSGN.S and Mediobanca MDBI.MI are the offer's global coordinators.

Barclays BARC.L , Societe Generale SOGN.PA , Stifel ST.N and Santander SAN.MC , the last to join, are bookrunners.

Underwriters will cover up to 807 million euros of the issue, MPS said in a statement early on Thursday, just minutes after receiving the signature of the eighth bank.

Up to 200 million euros of the capital will come from France's AXA AXAF.PA , MPS' partner in an insurance joint-venture.

Another 50 million euros are being guaranteed by London-based fund Algebris, whose founder Davide Serra is a close associate of Lovaglio.

SEEKING REASSURANCE

With markets gripped by fears about recession, conflict in Ukraine, inflation and higher rates, the eight banks due to backstop the sale had refused to take on the risk without reassurances about how much stock they could be left holding.

The state will put in 1.6 billion euros towards the capital raising, based on its 64% stake. European Union rules on state aid means the remainder must be raised from private investors.

MPS said that some investors had committed with the underwriters to buy new shares for a sum equivalent to more than half the private portion of the capital increase.

As well as the AXA contribution, asset manager Anima Holding ANIM.MI , another MPS partner, will invest 25 million euros after Lovaglio stalled on its offer of putting in 10 times that sum in return for a new commercial accord.

Also some holders of MPS' junior bonds such as U.S. fund PIMCO have pledged to back the deal after the price of that debt plunged to half its nominal value on risks of a forced conversion into equity, two people close to the transaction said. PIMCO declined to comment.

Small savers who are MPS customers are expected to be persuaded to invest more money to avoid seeing the value of their existing holdings wiped out in the recapitalisation.

Local banking foundations in Tuscany - charitable organisations overseen by Italy's Treasury - have already put in some 30 million euros.

After its market value shrunk to just 256 million euros, MPS will sell the new shares with a discount of only 8.6% over Wednesday's closing price stripped of subscription rights.

That is a fraction of the discount normally offered to make these offers appealing.



Monte dei Paschi di Siena Link



Additional reporting by Francesca Piscioneri; Editing by Mark
Potter and Keith Weir

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.