Monte dei Paschi cash call 93% covered but shareholders shy away

Monte dei Paschi di Siena has covered 93 per cent of its controversial €2.5bn rights issue despite a meagre take-up by the bank’s shareholders.

The Italian state contributed €1.6bn to the ailing lender’s capital raising effort, or 64 per cent of the total. Another 19 per cent was covered by a group of investors which agreed to mop up part of any unsold shares.

Other current shareholders, including retail investors, took up just 10 per cent of the cash call — the seventh MPS has gone through in the last 15 years.

The two-week offer period for shareholders with pre-emption rights in the capital increase — meaning they had the right of first refusal on new shares — ended on Monday, MPS said in a statement.

Other shareholders will now have the opportunity to buy any unsold stock.

The cash call follows a series of scandals and severe losses at the world’s oldest bank across the past two decades.

The FT revealed last week that Brussels was closely monitoring the capital increase over concerns some investors, including a group of banks underwriting the full amount reserved to private investors, were being offered a series of sweeteners in exchange for their backing.

Banks including Citibank, Bank of America, Credit Suisse and Mediobanca have underwritten €807mn of the capital increase and Milan-based asset manager Algebris has done the same on an additional €50mn.

The lender has entered additional agreements with other investors who have made commitments to buy any unsold shares, including the investment arm of French insurer Axa and Italian asset manager Anima.

That group of sub-underwriters will now contribute 19 per cent of the total, according to the statement.

They are being paid €125mn in underwriting fees from MPS and will have to mop up any shares left unsold at the end of the process.

Under EU state aid rules the state is allowed to contribute an amount up to €1.6bn of the total rights issue. According to the structure of the capital increase the Italian Treasury can only invest €1.78 for every euro contributed by investors or guaranteed by the banks.

Italy’s new finance minister Giancarlo Giorgetti said on Monday the government planned to sell its stake in “an orderly way” and it would make sure “MPS ends up as a strong bank”.