Italian bank fundraising attracts ‘state aid’ scrutiny in Brussels

Brussels officials are concerned that a €2.5bn fundraising at the world’s oldest bank Monte dei Paschi di Siena could constitute illegal state aid.

The Italian treasury is buying 64 per cent of the shares in the capital raise, which has been shunned by most private investors and launched last week only after underwriters were offered an unusually lucrative deal.

Under EU rules, the state can only take part if all investors — public and private — are subject to the same conditions.

“The question is whether any of the parties backing the rights issue were offered a sweetener as opposed to Italian taxpayers that aren’t receiving any risk reduction offer or other incentive,” said one official on condition of anonymity.

MPS, which dates back to the 15th century, was nationalised in 2017 in a €5.4bn government bailout after a series of scandals and severe losses. The current cash call is the company’s seventh in 14 years.

Eight underwriters, including Citigroup, Bank of America, Credit Suisse, Mediobanca and alternative investment fund Algebris, are sharing a €125mn payment for underwriting a fraction of the overall capital increase.

International investors claim such a fee to be exceptional and “off-market”. The Italian financial regulator, Consob, required MPS to issue a statement highlighting the exceptional fee amount as it would affect the bank’s capital buffer targets.

To hedge their risk further, the banks have signed sub-underwriting agreements worth at least €410mn with third-party investors including French insurer Axa and asset manager Anima, both of which have commercial partnerships with MPS, and a group that also hold MPS Tier 2 bonds including Pimco, Melqart and Bluebay. 

The sub-underwriters have committed to buy a certain amount of MPS shares if current shareholders do not exercise their rights to buy the stock during the two-week rights issue. 

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