October 23, 2018 / 4:13 PM / a month ago

Monte dei Paschi may not issue new Tier2 debt this year - sources

MILAN/ROME (Reuters) - Italian state-owned lender Monte dei Paschi (BMPS.MI) does not need to issue new Tier2 debt this year, two sources close to the matter said on Tuesday after the bank held a series of meetings with investors.

It had been planning to test the market for such an issuance after the summer break but a sale now looks increasingly difficult with the Italian bond market stalled and Italian debt costs spiking.

The spread between Italian and German 10-year government bonds rose to 319 basis points on Tuesday, nearing recent five-and-a-half year highs.

Monte dei Paschi pledged to issue Tier2 debt under the terms of a restructuring plan with the European Commission.

It is targeting a 200 million euro ($230 million) issue, though not necessarily by the end of 2018, one of the sources said.

The source added MPS would now press ahead only if the conditions were acceptable.

A second source, who took part in one of the meetings, said the bank was ahead of its business plan targets, a fact that helped relieve pressure from the regulators to complete a new junior debt issue within the year.

MPS issued a 750 million euro 10-year Tier 2 bond in January.

Its investor roadshow took place as Italian banking stocks fell victim to concern over Italy’s expansionary draft budget, which was officially rejected by the European Commission on Tuesday.

($1 = 0.8709 euros)

Reporting by Paola Arosio and Stefano Bernabei; Writing by Giulio Piovaccari; Editing by Jan Harvey

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