ROME (Reuters) -The extension of the deadline to return Italy’s Monte dei Paschi (MPS) to private hands will be “sufficiently long” to ensure the bank can relaunch and attract new investors, a senior Treasury official said on Tuesday.
Italy’s Treasury Director General Alessandro Rivera told a parliamentary hearing that Rome would eventually offload its stake in the bank it rescued in 2017.
Italy is in talks with the European Union over the deadline for the reprivatisation of MPS.
“Keeping it in state hands indefinitely is not an option,” Rivera said, adding that failed negotiations over a potential merger with UniCredit had shown the EU that it is not possible currently to clinch a deal meeting the required legal and economic conditions.
Rivera did not clarify how long an extension Italy will seek. A source with knowledge of the matter has told Reuters that Rome wants to push back the deadline by years.
“We believe it’s necessary to discuss an adequate extension. With adequate I mean a sufficiently long time span to implement further measures to strengthen the bank and improve its profit outlook,” Rivera said.
After the collapse of the proposed UniCredit deal https://www.reuters.com/business/finance/exclusive-italy-unicredit-set-call-off-talks-over-monte-dei-paschi-sources-2021-10-23, Italy is preparing to see through some of the measures it had devised to smoothe the way for the sale. It plans to rid MPS of its residual problem loans as well as any non-ordinary legal risks, while also bolstering its capital, sources have told Reuters.
Rivera said the Treasury is ready to do its part to help MPS in its capital-raising efforts, indicating that Italy would buy into a new share issue to keep its current 64% stake.
In doing so, Italy intends to avoid inflicting losses on the bank’s investors, in particular its junior bondholders, Rivera said, confirming what sources told Reuters last month.
The bank’s junior debt has been dogged by concerns that its holders would have to incur losses under EU state aid rules before Italy could help with the bank’s capital shortfall, but Rivera said that the new funds Rome is preparing to inject into MPS would not constitute state aid.
The size of the cash call will be set as part of discussions with European authorities on measures the bank must adopt after falling behind on restructuring commitments.
As a consequence, MPS will need to update the business plan management had readied to demonstrate its prospects through to 2025, Rivera said, adding that this is needed for both the European Commission, the European Central Bank and for the investment market.
“The ministry will do its part but it is paramount the plan is attractive for other investors,” he said.
(Reporting by Giuseppe Fonte and Valentina ZaEditing by David Goodman)