Mps and the 2.5 billion euro capital increase: Are the banks of the guarantee syndicate committed to underwriting the newly issued shares of Monte di Stato on the verge of throwing in the towel? Did the recapitalization of Monte dei Paschi di Siena flop before it even started?
Il Financial Times summarizes the swirl of indiscretions of the last few days, re-presenting the drama Mps:
“The summits of Monte dei Paschi could start exploring choices other than the € 2.5 billion capital increaseafter some of the banks (of the recapitalization guarantee consortium) have indicated that they are not willing to absorb the unexercised that would arise in the event that private capital does not participate “ to the operation.
Burden sharing is the expression that has haunted for days Mps, the entire city of Siena, Italy, the upcoming Meloni government and the most illustrious victims, that is the holders of the subordinate bonds that would be sacrificed at the altar of the Monte.
Meanwhile, the Corriere della Sera highlights everything the urgency for the success of the operation, underlining how the CEO Luigi Lovaglio should “Find 400 million by Tuesday evening”, in order to launch the increase on 17 October.
“To be able to open the operation on that date it takes one week as a sprinter – we read in the newspaper – With the negotiations behind us, we have reached the moment of signing the commitments. Having obtained the constitution of the consortium, with signatures arriving even at the last moment, Monte dei Paschi will meet, in all likelihood tomorrow, Tuesday 11 (tomorrow), the board of directors for the approval of the last fundamental details of the operation. The additions to the prospectus of the capital increase will be presented to Consob on Wednesday 12th, which the Commission will probably examine at the meeting on Thursday 13th. It is the last useful date to allow the opening of the capital increase on Monday 17. If everything goes smoothly, but the variables are still many, in a week Lovaglio will be able to breathe a partial sigh of relief. Much remains to be done, but the most important step will be taken. To get there, however, we need to find at least four hundred million euros by tomorrow and get the go-ahead from Consob, expected between Thursday and Friday ”.
And when it says at least 400 million, it means that at least such a sum must be collected also because, a banker consulted by the FT did some math, arriving at the following conclusion: “For every euro that a private investor commits, the Treasury can invest 1.78 euro. Consequently, if investors committed to pay 400 million euros, the Treasury could inject 712 million euros, and with the capital increase 1.2 billion euros would be raised: an amount below the target “ (of 2.5 billion). Not a little lower, given that the fresh funds collected would be less than half the amount that you want to collect.
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The Financial Times is not optimistic:
“For the past two months – we read in the article in the British newspaper entitled “Ailing lender Monte dei Paschi explores options as € 2.5bn cash call falters” – both home and worldwide traders have indicated their intention not to participate in the challenge ” of the capital increase of Monte. Thorn that sticks directly in the side of MPS which, to respect the agreements made with Brussels, must raise 900 million private capital (the remaining 1.6 billion euros will be injected pro-quota by the bank’s main shareholder, the Mef-Tesoroowner of a shareholding of approximately 64%).
The FT reminds that the French insurance company Axa and Anima Holding, the asset management company whose 20% is in the hands of Banco BPM, have each indicated their willingness to contribute at least to an amount of 250 million euros, as they are eager to strengthen their current collaboration with Mps. But both Anima and Axa did not respond to the Financial Times’ request for information. Which has no good news to give, far from it: the article mentions some bankers from Milan and four traders based in Londonwho confirmed that not only no one is queuing up to buy the shares (in the capital increase postponed to next Monday 17 October), but that interest is in hiding: and this, “For reasons that transcend the current negative market context”.
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The reasons are inherent to the bank. In short words, Mps is scary. In particular, traders, it is reported, “They cited the uncertainty regarding the privatization plan of the financial institution, the low efficiency (in Mps), those potential legal costs that, although decreased, still exist “.
With Siena, no doubt about it, the impression is to always go back in time, the feeling is that in 2022 we still remained in 2014, when the Financial Times defined the “Monte dei Paschi source of embarrassment” for the city of Siena. A bank full of problems frozen in time, despite the numerous capital increases in the last decade.
“When they tried to put the bank up for sale in 2021, only Apollo and UniCredit they entered the data room, which means that the asset was not attractive from the start; then UniCredit submitted further requests to the Treasury, following the due diligence “, the Financial Times recalled again. Then drop everything: Treasury and bank.
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Mps: the fears of the banks of the guarantee syndicate
Sources close to the dossier, writes the FT, report that the Sienese bank is advising in these hours to consider different options, which could be – and the specter has been hovering for several days already – that of burden sharing, together with the sale of potential assets.
In short, what had emerged in recent weeks, namely that the patience of the banks of the underwriting syndicate committed to underwriting the capital increase had reached its limit – is confirmed, which means that Bank of America, Citigroup, Credit Suisse and Mediobanca they could be close to giving the berservito to the CEO Luigi Lovaglio & Co, due to the lack of sufficient interest on the part of private investors to participate in the capital increase. The premises have been confirmed not at all comforting for a few weeks, when we started talking about interest in Mps on the part of the market not received, in a context in which the CEO Luigi Lovaglio repeated to the end lurgency of recapitalization (necessary in the very short term to raise the capital necessary to finance the early exit of 3,500 employees. Among other things, these 3,500 departures have become more than 4,100: an army of employees who, it seems, want to flee, before the boat lunges, someone says).
It is worth remembering that, according to some rumors, the underwriting syndicate banks they had expressed a desire for quite a while postpone the operation even to 2023.
And, in a note dedicated to Mps, IG wrote recently:
“Some investors point out that the operation is expected to be completed by the end of the year so as not to undermine the bank’s strategies that provide for numerous layoffs (which will generate one-off charges of € 800 million only in 2022 and savings of € 270 million in 2023) without taking into account the regulatory effects on the capital of the Sienese institute which will have direct effect from next year “.
In short, a possible flop of the capital increase it is hardly a surprise. Markets have been considering the hypothesis for quite a while.