November 17, 2017 / 12:28 PM / a year ago

Italy's Carige in talks to salvage vital cash call

* Carige failed to secure backing from underwriters

* Needs cash to prevent it being wound down by ECB

* CEO trying to find a solution on Friday in series of meetings

* Carige shares suspended, rival Creval’s shares drop

MILAN, Nov 17 (Reuters) - Italian lender Banca Carige is racing to salvage a 560 million euro ($661 million) share issue after it failed to secure backing from underwriters, sending fresh tremors through the country’s banking sector.

Carige, saddled with a heavy burden of bad loans and accumulated losses, needs to raise the money to prevent it being wound down by the European Central Bank, a fate meted out to two other struggling regional Italian lenders this year.

Carige’s failure to raise capital would once again undermine confidence in the sector just as risks of contagion seemed to have subsided following a string of bailouts. It could jeopardise efforts by small lenders to tap investors for cash in order to meet regulatory demands to step up bad loan disposals.

Carige had hoped to finalise underwriting for the rights issue on Wednesday but last-minute difficulties meant Credit Suisse, Deutsche Bank and Barclays did not commit to take on any unsold shares.

The bank has said Chief Executive Paolo Fiorentino would continue to work on Friday to try to reach a deal with underwriters after making progress in talks with key shareholders, institutional investors and the three banks.

A source familiar with the matter said meetings were scheduled throughout the day to seek a solution.


Carige’s troubles reverberated across Italy’s battered banking sector, hitting in particular rival Creval, which has just announced plans to raise 700 million euros, or more than five times its market value, in a share issue.

Italian banks are saddled with a quarter of Europe’s soured loans, a hangover from a deep recession that ended in 2014, and are struggling to offload them as they can only sell at a loss, burning through capital.

Creval shares fell 19 percent on Thursday and were indicated down as much as 30 percent of Friday but they failed to trade.

Carige shares were suspended from trading.

“It’s clear that if the Carige deal falls apart Creval’s won’t work either,” said fund manager Giuseppe Sersale of Anthilia Capital.

Carige said late on Thursday commitments from investors so far totalled around 11.75 percent of capital, or 328 million euros based on Reuters calculations, and more were in the process of being finalised.

In addition, top shareholder Malacalza Investimenti said it had sought regulatory approval to raise its stake to 28 percent from 17.6 percent and it would support Carige, despite recent misunderstandings with banks in the consortium.

Malacalza has invested 264 million euros to build its stake since 2015, when Carige last sold new shares at 1.17 euros each. The stock last closed at just under 15 euro cents.

Another local businessman is the bank’s second biggest shareholder with 6 percent.

Carige must boost its core capital ratio, which lags behind the threshold recommended by the ECB, by the end of the year.

The share issue is a key plank of a capital plan which also included asset disposals and a debt swap. Carige has warned its business could be at risk if the plan falls through.

Rome has this year rescued larger rival Monte dei Paschi di Siena and liquidated two failing regional banks in Veneto, committing up to 23 billion euros of public money.

Like these banks, Carige has been hit by bad loans and poor management. It has lost nearly 3 billion euros since 2013. ($1 = 0.8475 euros) (Reporting by Valentina Za; Editing by Mark Bendeich and Elaine Hardcastle)

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