Banca Monte dei Paschi di Siena will seek to sell shares by the end of the year and extend a debt-for-equity swap in a last-ditch effort to privately raise €5 billion and avoid a state rescue.
The swap offer will be increased to €4.5 billion and will include its so-called Fresh 2008 hybrid bond, the bank said in a statement. Bondholders have already agreed to exchange about €1.02 billion for shares. The swap offer for retail investors as well as the share sales reserved to them are subject to regulatory approval.
"It's a challenging attempt, with a high-execution risk," said Jacopo Ceccatelli, head of Marzotto SIM, a broker-dealer based in Milan. "It can only be successful if a white knight is available to invest in the bank. I doubt they can get one now after having unsuccessfully tried for months to get commitments from investors around the world."
Monte Paschi aims to raise enough from the second bond conversion to get a commitment for about €1 billion from Qatar’s sovereign wealth fund. The banks advising the deal would place shares with investors in the market, according to people with knowledge of the matter.
Should the share offering succeed, €28 billion of soured loans will be bundled into securities and sold to investors, removing them from the bank’s balance sheet. The capital raised would be used to cover the bank for losses it would book in selling the troubled loans.
Monte Paschi shares climbed as much as 8.1 per cent in Milan trading.