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EXCLUSIVE-Investment funds offered to invest in Italy's Veneto banks 3 weeks ago-sources
June 23, 2017 / 6:34 PM / 6 months ago

EXCLUSIVE-Investment funds offered to invest in Italy's Veneto banks 3 weeks ago-sources

LONDON, June 23 (Reuters) - A group of four international investment funds offered to inject 1.6 billion euros ($1.79 billion) of fresh capital into two ailing Italian banks in Veneto at the end of May, sources told Reuters, but their plan was not pursued by Rome.

Funds Sound Point Capital, Cerberus, Attestor and Varde submitted a rescue proposal for Banca Popolare di Vicenza and Veneto Banca on May 30, the sources familiar with the situation said, using Deutsche Bank as their financial adviser.

However the sources said the offer was not formally followed up on by Rome.

The Italian government is expected to start liquidation proceedings for the two banks on Friday or Saturday, with retail bank Intesa Sanpaolo set to buy their good assets for 1 euro.

The state is expected to foot the bulk of the bill, taking on the lenders’ soured debt.

The consortium led by U.S. hedge fund Sound Point Capital - who has former Goldman Sachs chairman Stephen Friedman as a limited partner - offered initially to pump in an overall 1.6 billion euros of capital.

Their proposal envisaged about 1.3 billion euros going into new tier one and tier two bonds that the banks would issue to them, and another 300 million euros into their shares, the sources said.

The proposal was briefly discussed with the Italian Treasury in early June but the funds never got a formal response, the sources said, adding news of a possible deal with Intesa came as a surprise.

The Bank of Italy and Deutsche Bank declined to comment while the Italian Treasury, the Veneto Banks and the four investment funds were not immediately available for comment.

As part of the deal, the four funds were hoping to take a 15 percent stake in the two banks and control their governance, the sources said.

They added that they had worked closely with Popolare Vicenza boss Fabrizio Viola, a former CEO of Monte dei Paschi, who was going to play a leading role if the plan had succeeded.

Italy has tried for weeks to prevent the two banks, which have a capital shortfall of 6.4 billion euros, from being wound down under European banking rules due to concerns senior bondholders and large depositors would be hit with heavy losses.

However Rome failed to convince other, healthier lenders, to stump up funds to salvage them. ($1 = 0.8928 euros) (Reporting By Pamela Barbaglia; Editing by Rachel Armstrong and Adrian Croft)

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