May 29, 2017 / 4:24 PM / 3 months ago

Monte dei Paschi says in exclusive talks over bad loan sale

MILAN, May 29 (Reuters) - Italy's fourth biggest bank Monte dei Paschi di Siena said it was in exclusive negotiations with a domestic fund and a group of investors over the sale of its bad loan portfolio, which it needs to offload to be allowed to receive state aid.

The bank, which at the end of last year had 26 billion euros in gross defaulting debts, has set a June 28 deadline for the talks with Quaestio, the fund which manages banking industry rescue fund Atlante and which will also conduct negotiations on behalf of other investors. The bank did not name those investors.

The lender has requested a state bailout to help fill an 8.8 billion euro capital shortfall. It has been stuck in negotiations for months with European authorities over the terms of its bailout and a restructuring plan that is set to include thousands of job cuts.

A senior Italian treasury official said on May 23 a deal with the European Commission would be struck in a matter of days.

A source close to the matter told Reuters last week that Atlante, with one or more private equity funds, could buy the junior and mezzanine tranches of the bad loan portfolio for 1.3 billion euros, while the senior tranche would be backed by a state guarantee and sold to institutional investors.

A second source said U.S. funds Fortress and Elliott were carrying out due diligence on the portfolio which was expected to close on June 9.

Reporting by Silvia Aloisi

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