MILAN (Reuters) – Italy’s Monte dei Paschi di Siena said a new share sale to raise up to 2.5 billion euros ($2.4 billion) would cost it 132 million euros, mostly due to fees paid to financial institutions backstopping the issue.
Monte dei Paschi (MPS) said it was set to pay 125 million euros in fees to a group of eight banks led by global coordinators Bank of America, Citigroup, Credit Suisse and Mediobanca, plus London-based fund Algebris.
After difficult negotiations that risked derailing the capital raising, the eight banks have agreed to guarantee the share issue that starts on Monday for up to 807 million euros.
Algebris is backstopping up to another 50 million euros.
MPS said the underwriting contract included customary material adverse change (MAC) clauses, allowing guarantors to walk away in case of major negative events.
Based on its stake in the bank Italy will cover 64% of MPS’ cash call, leaving an up to 900 million euro portion that must be funded privately to meet European Union state aid rules.
To secure support from the banks, MPS has been forced to gain investor commitments covering at least half of the private portion of the capital increase.
The bank said the cost of the capital increase would shave 15 basis points off its Tier1 capital target in 2024.
It said the European Central Bank (ECB) had noted that target was 150 basis points below the average for Italian banks under direct ECB oversight.
“Such a gap … could represent a possible hurdle to a merger deal with a potential partner,” MPS said.
($1 = 1.0263 euros)
(Reporting by Valentina Za, editing by Gianluca Semeraro and Keith Weir)
