Popolare Vicenza CEO says time running out as private equity shuns deal

[LONDON] Private equity funds are not interested in investing in the two Veneto-based banks Italy is trying to rescue, sources said, as Popolare di Vicenza's chief executive warned time was running out to secure a bailout deal.

Italy has until the end of June to get European authorities to agree to a state rescue of the two banks, which risk being wound down under 'bail in' rules that would hit investors to shield taxpayers.

"The search for a solution to the crisis is dragging on in a way that is unsustainable. What was sustainable a month ago risks no longer being so in a month's time," Popolare di Vicenza CEO Fabrizio Viola told Friday's Corriere della Sera.

To help its banks, which are weighed down by 350 billion euros (S$544.3 billion) in bad loans or a third of the euro zone's total, Italy is attempting to rescue the two Veneto banks and bigger rival Monte dei Paschi di Siena.

On Thursday it struck a preliminary deal over Monte dei Paschi but the two Veneto lenders are struggling to find the 1.2 billion euros in private capital that sources said are needed to get EU approval for the state intervention.

They must fill a 6.4 billion euro capital shortfall and have asked for state aid under an exception to bail in rules which would spare senior bondholders and large depositors.

Economy Minister Pier Carlo Padoan has said investors will not be bailed in and sources say Rome is lobbying to halve the amount of private capital needed.

Banking industry bailout fund Atlante, which spent 3.4 billion euros to save Popolare di Vicenza and Veneto Banca last year, is refusing to stump up more money.

Corriere della Sera on Friday cited sources saying Italy could present Brussels with a letter for an investment in the two banks from private equity funds Atlas, Centerbridge, Warburg Pincus together with hedge fund Baupost.

Italy's Treasury had no immediate comment.

The four funds had discussed with state-sponsored, privately-funded Atlante a possible investment in Popolare di Vicenza a year ago, but talks led nowhere.

A source close to one of the funds said they were no longer interested in the two banks and there were no plans to reopen the file. Separately, a market source close to Popolare di Vicenza confirmed there were no talks ongoing with private equity funds.

The source said buyout funds were repeatedly approached to invest in the two banks but they had little appetite at a multiple of 0.6-0.7 times the banks' book value.

Such levels are in line with the average for listed Italian banks but the two Veneto-based banks are unprofitable. They have lost a combined 8 billion euros in 2014-2016 and have warned they expected to book further loan losses this year.

Viola, who was brought in by Atlante to oversee a merger of the two banks, said they had 30 billion euros in healthy loans that would have to be withdrawn in the event of a bail in, dealing a "tremendous" blow to the local economy and would also have repercussions at the political level.

Italy faces national elections this autumn or next year.

REUTERS