January 19, 2018 / 12:32 PM / a month ago

UPDATE 1-Italy's Creval expects to launch new share issue on Feb. 19 - sources

(Adds details)

MILAN, Jan 19 (Reuters) - Credito Valtellinese (Creval) expects to launch its planned 700 million euro ($859 million) share sale on Feb. 19, two sources familiar with the matter said, testing investor demand for Italian banks ahead of a general election.

Italians head to the polls to pick a new government on March 4 and Creval had hoped to wrap up its stock issue before then, seeking the money to clean up its balance sheet and prepare for a possible merger down the road.

Based on opinion polls, a centre-right alliance looks set to win the most seats but no outright majority, making it hard to predict what sort of coalition government might finally emerge.

If the stock sale were launched on Feb. 19 - which the two sources said was now the “most likely date” - shareholders in the bank would have until Feb. 2 to exercise their right to buy in, daily Il Messaggero reported on Friday.

Unexercised subscription rights would be offered on the market in the week following the election.

Creval declined to comment.

Rooted in the wealthy Lombardy region, the mid-sized lender is seeking to raise almost six times its market capitalisation to fund a restructuring plan aimed at cutting its soured loan burden below 10 percent of total loans in 2020.

Bad debts that grew during a deep recession are the focus of investors’ and regulators’ concerns over Italian banks.

Mediobanca and Citi have made a pre-commitment to underwrite Creval’s cash call, but more banks are expected to join them, the sources said.

Credit Suisse, which together with Deutsche Bank in December helped Carige pull off a 544 million euro capital increase, is seen as the next most likely candidate to join in.

$1 = 0.8149 euros Reporting by Gianluca Semeraro, Andrea Mandala and Valentina Za; Editing by Mark Potter

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