MILAN (Reuters) - Shareholders in Banca Carige (CRGI.MI) took up 66 percent of a 500 million euro (£441 million) cash call demanded by regulators, leaving the Italian bank to rely on accords with a number of investment firms to fill up the gap.
The capital raise is expected to remove an immediate threat to the industry but concerns remain over Italian banks, which hold one quarter of Europe’s 843 billion euros in soured debts and are under increasing regulatory pressure to offload them.
Carige needs the cash to comply with European Central Bank’s demands it boosts capital and starts shedding bad debts by the end of the year and risked being wound down otherwise.
Carige said in a statement it had raised 331 million euros from shareholders and another 46 million euros from bondholders hit by a recent mandatory debt conversion.
To reach the 500 million euro minimum requested by the ECB, the bank has said it has in place a number of accords with investors ready to take up unsold shares. Two sources close to the matter on Wednesday said such accords totalled 120 million euros, bringing the total raised on the market to 497 million euros.
“Carige represents the first rescue transaction of a bank in Europe executed through a market offer,” Paolo Celesia, head of equity capital markets at Credit Suisse Italy said.
Credit Suisse, Deutsche Bank and Barclays are the cash call’s underwriters. Last-minute difficulties in signing the accord with them had forced Carige to delay the launch of the offer, rattling the sector.
A group of local businessmen who are the bank’s core shareholders has invested further in the lender to avoid being wiped out. But new shareholders are expected to emerge, including London-based hedge fund Chenavari, which is in talks to buy Carige’s consumer credit unit Creditis and, as part of the process, will take up to 40 million euros in unsold shares.
Similarly, Credito Fondario, a debt servicer part of British investment firm Tages Group, which closed on Wednesday the purchase of 1.2 billion euros in bad loans from Carige, is also set to become a shareholder in the bank.
After Italy bailed out its fourth-largest bank Monte dei Paschi BMPSMI> and liquidated two regional lenders this year, Carige came to the fore as the last remaining large bank still in difficulty following a deep recession.
“I think interest from some foreign investors signals confidence in Italy’s improving economy, which is good news,” Roberto Lottici, a fund manager at Banca Ifigest, said.
“But as far as the sector is concerned there still are too many uncertainties given its bad loan burden. Investors’ decision will be guided by regulatory moves.”
Italian lenders, which trade at a discount to the value of their assets due to fears of fresh loan losses, have come under pressure after the European Central Bank proposed tougher new rules on bad bank debts. Carige priced new shares at just 0.25 times its book value, compared to its peer’s 0.4-0.5 times.
Reporting by Valentina Za; Editing by Toby Chopra