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Monte Paschi starts crucial $4.6 bln bonds-to-equity swap

Monte Paschi starts crucial $4.6 bln bonds-to-equity swap

Banca Monte dei Paschi di Siena SpA starts to swap 4.3 billion euros ($4.6 billion) subordinated bonds for equity Monday, in the first crucial stage of the Italian bank’s turnaround plans.

Bondholders will have five days from Nov. 28 to sign up for the exchange, a step which will allow the bank to proceed with a share sale by the end of the year. The offer excludes 29 million euros of FRESH securities issued in 2003.

Chief Executive Officer Marco Morelli is seeking to persuade investors that the troubled bank can turn a corner raising 5 billion euros of fresh money by swapping debt, selling new shares and finding new anchor investors. As part of turnaround the executive is shedding 28 billion euros of bad loans, and reorganizing businesses. The swap will enable the bank to reduce the amount of new money it needs to raise in the market.

 The bank extended the window for investors in the 107 million euros of Tier 1 bonds to agree to receive an offer to noon London time. If bondholders owning 50 percent of the notes don’t agree to the so-called consent solicitation, the bank won’t be able to offer to swap, it said.

The conversion ratio into stock will be the same as for new investors in a subsequent share sale. The maximum price for the new shares, following a reverse stock-split of 1 new share for 100 existing shares, will be 24.90 euros, the bank said Friday.

The lender, which had the lowest scores in the banks’ stress tests in July, has been required by the European Central Bank to complete the capital raising by the end of the year. Monte Paschi, bailed out twice, has burned through 8 billion euros in investors’ equity since 2014. The bank is burdened by soured debt and losses on derivatives bets gone wrong under previous management.

Source: Bloomberg

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