UPDATE 3-Monte dei Paschi top shareholder to sell up to 15 pct stake

* Foundation shareholder to keep blocking minority

* Sale seen in days, weeks, not months - source

* Foundation in talks with creditors over 1.1 bln euro debt

By Silvia Aloisi and Stefano Bernabei

MILAN, Feb 14 (Reuters) - MILAN, Feb 14 (Reuters) - Banca Monte dei Paschi di Siena SpA's core shareholder will sell a stake of up to 15 percent in Italy's No.3 lender, it said on Tuesday, in a move that will allow it to cut debt but still block any hostile bid.

Three sources familiar with the situation said the cash-strapped Monte dei Paschi foundation, which has a 49 percent stake in the eponymous bank, including preference shares, was in talks with domestic investors to quickly sell the stake as it races to meet a deadline set by creditors to come up with a debt-cutting plan.

Tuscany-based Monte dei Paschi, the world's oldest bank, is viewed as one of Italy's weakest due to its thin capital base and low profitability.

At Tuesday's closing price, the 15 percent stake up for sale was worth around 450 million euros.

In a statement on Tuesday, the foundation said its board had agreed to sell a stake of up to 15 percent, but gave no indication about the timeframe, saying only that the sale would be carried out in such a way as to maximise its "economic and strategic value."

A source close to the foundation told Reuters the sale could be finalised quickly, in "days or weeks rather than months."

The foundation, a non-profit body whose aim is to reinvest dividends in charity and social projects, ran up 1.1 billion euros in debt to keep its grip on Monte Paschi when the bank carried out a capital increase last year.

It is in talks with creditor banks - mainly foreign investment banks - to either restructure its debt or win time by taking up a bridge loan from a small group of Italian banks. Selling the MPS stake would strengthen its position at the negotiating table, two sources familiar with the situation told Reuters.

According to three sources, the foundation is already in talks with some Italian institutional investors. One of the sources said these included Italian private equity funds Clessidra and Equinox. Neither fund was available for comment.

Even if the full 15 percent is sold, the foundation would still hold of around 33.5 percent of Monte Paschi - big enough to veto any hostile takeover attempt under Italian law.

The names of BNP Paribas SA and Credit Agricole SA - both already active in Italy through a retail banking network - have been mentioned by sources in the past as potential buyers, although the foundation is likely to want to try and keep Monte Paschi in Italian hands.

Moreover, any buyer of the 15 percent stake would risk having limited influence on Monte Paschi as long as the foundation retains a core stake.

The foundation's finances have been strained funding two capital increases by the bank since 2008, giving creditors some of its Monte dei Paschi shares as loan guarantees.

In November, it reached a standstill agreement with its creditors - Mediobanca, Credit Suisse Group AG and a pool of banks headed by JP Morgan Chase & Co - giving it until mid-February to come up with a plan to reduce its debts.

Sources close to the matter have said the foundation is negotiating a 900 million euro loan with three top Italian banks - Mediobanca, UniCredit SpA and Intesa Sanpaolo SpA - that would allow it to reimburse its foreign creditors and buy time to sell the stake.

Intesa, UniCredit, JP Morgan and Credit Suisse declined to comment. Mediobanca was not immediately reachable for comment.

Aside from the foundation's debts, Monte dei Paschi needs to find 3.3 billion euros by June - equal to its current market capitalisation - to meet tougher capital requirements set by the European Banking Authority to help banks withstand the region's debt crisis.

Monte dei Paschi's shares have lost 28 percent of their value over the past year and closed 1.9 percent lower at 0.30 euros on Tuesday. Like other Italian lenders, the bank has been hit hard by a funding crunch stemming from to the debt crisis and by EBA requests to mark down its government bond holdings.

Monte dei Paschi had 25 billion euros of Italian government debt at the end of September. (additional reporting by Lisa Jucca)