Paschi Said to Line Up Underwriter Backing for Stock Sale

Apr 17, 2014 10:39 am ET

(Updates with shares in last paragraph.)

April 17 (Bloomberg) -- Banca Monte dei Paschi di Siena SpA has secured commitments from investment banks to underwrite a stock sale of as much as 5 billion euros ($6.9 billion), according to three people with direct knowledge of the plan.

Italy’s third-largest lender may increase the amount it plans to sell from 3 billion euros previously to cover any shortfall that may arise from the European Central Bank’s review of lenders’ assets, said the people, who asked not to be identified because the preparations are private.

A spokesman for Monte Paschi declined to comment. Paschi’s board will meet tomorrow morning to discuss the capital increase, the company said in a stock-exchange statement today.

Monte Paschi, whose former managers are engulfed in probes into their role in masking losses and obstructing regulators, needs to raise funds to repay part of a 4.1 billion-euro state bailout this year before a European Union-imposed deadline. Chief Executive Officer Fabrizio Viola is seeking to return the lender to profit by cutting jobs and assets.

The group of 10 banks led by UBS AG, which had originally agreed to underwrite the offering, will remain unchanged, two of the people said. A UBS official declined to comment.

Monte Paschi shares gained as much as 3.7 percent and were 2.7 percent higher at 23.73 cents as of 4:38 p.m. in Milan, valuing the bank at 2.8 billion euros.

Paschi had sought to hold the stock sale in January and was blocked by its then-biggest shareholder, Fondazione Monte dei Paschi di Siena, which sought to sell its own shares in the lender first to avert insolvency. The foundation is awaiting regulatory approval on the sale of a 6.5 percent stake to Fintech Advisory Inc. and BTG Pactual Europe LLP, which may reduce its holding to less than 5.5 percent.

--With assistance from Sonia Sirletti in Milan.