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Monte Paschi said to seek fast sale of debt after EU consent

Wednesday, March 8, 2017 - 17:35

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Banca Monte dei Paschi di Siena SpA wants an accelerated sale process of about 28 billion euros (S$41.803 billion) of bad loans to start as soon as European authorities approve its new business proposal, according to people familiar with the matter.

[MILAN] Banca Monte dei Paschi di Siena SpA wants an accelerated sale process of about 28 billion euros (S$41.803 billion) of bad loans to start as soon as European authorities approve its new business proposal, according to people familiar with the matter.

Monte Paschi intends to sell all of the loans in a single block and it will only give bidders one month to analyse the debt before requesting bidding offers, said the people, who asked not to be identified because the plans are private. The bank may sell the portfolio for less than 25 per cent of its gross book value, the people said.

"A fast deal is feasible because the portfolio is well known by the experts, but the real crux is how much discount the buyers wants," said Vincenzo Longo, a Milan-based strategist for brokerage firm IG Markets Ltd.

"It's all about the price."

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The troubled Italian lender is drafting a new business plan that needs to be validated by the European Commission so the bank can get aid from the Italian government.

State intervention became necessary after efforts to find anchor private shareholders failed in December. Under a previous plan, Monte Paschi was considering selling its bad loan portfolio through a securitisation backed by the state at 33 per cent of the gross book value.

The EC will only approve the plan if it meets European regulations that seek to reduce state intervention in banks. The commission, which is working with the European Central Bank and Italian authorities, hasn't said when it will approve of the government-led recapitalisation for Monte Paschi.

The bank is already contacting international funds to gauge appetite for the debt, the people said. Sales of soured loans typically take several months, with at least two bidding rounds for interested parties.

A representative for Monte Paschi in Siena declined to comment on the plan.

Monte Paschi has about 46 billion euros of bad and doubtful debt on its balance sheet, representing 34.5 per cent of all its loans as of December, according to company statements. That compares with an average of 16 per cent for the other five largest Italian banks, according to data compiled by Bloomberg.

The EC approval of the new business plan will determine what size losses Monte Paschi can book as a result of the sale without breaching minimum capital requirements, the people said. That will help to determine the exact amount of bad loans it can ultimately dispose of, they said.

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