MILAN/ROME (Reuters) - Italian lender Monte dei Paschi di Siena (BMPS.MI) approved on Tuesday a rights issue of up to 3 billion euros (2 billion pounds), more than its market value, to win EU approval for a state bailout.
The cash call, 500 million euros higher than the level the bank had announced in September, should be completed in the first quarter of 2014, the Tuscan lender said in a statement after a board meeting.
Monte dei Paschi’s current market value is about 2.3 billion euros ($3 billion).
The bank’s shares fell 7 percent by 1342 GMT to 0.18 euros, after a 7.5 percent slide on Monday, amid market expectations that the rights issue will be priced at a heavy discount to the market price.
Sources close to the matter have told Reuters the rights issue could be launched as early as January.
The cash call still needs to be approved by an extraordinary shareholder meeting, which the bank has convened for December 27.
The capital increase is part of a restructuring plan demanded by the European Commission to give its approval to 4.1 billion euros in state aid the lender received this year. Under the plan, the bank will pay back 3 billion euros in state loans next year.
The bank said the size of the capital hike had been increased so that it could pay in cash interest on the loans, thus avoiding partial nationalisation.
The bailout terms state that if the bank cannot pay the 9 percent coupon the bonds carry in cash, it has to issue new shares to the Italian treasury for an equivalent amount.
Ten banks are involved in the consortium underwriting the issue, with UBS UBSN.VX acting as global coordinator and Citigroup (C.N), Goldman Sachs (GS.N) and Mediobanca (MDBI.MI) as co-global coordinators.
Monte dei Paschi, which has lost nearly 8 billion euros in the past two years, is expected to also end 2013 in the red.
The bank, the world’s oldest, is at the centre of a judicial probe over its costly acquisition of smaller rival Antonveneta in 2007 and loss-making derivatives trades it made in the deal’s aftermath.
Editing by Pravin Char