Thursday 20 June 2019

Italy's struggling Carige in talks to break bond impasse

Banca Carigeis is Italy’s 10th-largest bank
Banca Carigeis is Italy’s 10th-largest bank

Stefano Bernabei and Valentina Za

The administrators in charge of Italy's Banca Carige are due to meet the heads of the fund that has propped up the troubled lender as the parties look to resolve an impasse standing in the way of the bank's rescue.

The European Central Bank (ECB) last week selected three commissioners to try to save the Genoa-based bank after the Malacalza family, Carige's biggest stakeholder, blocked a share issue that was part of an industry-financed scheme to stave off a collapse.

Italy's FITD depositors protection fund bought a €320m hybrid bond late last year to help Carige to reach a required total capital threshold.

Carige, however, failed to gain shareholder backing for an up to €400m new share issue that would have been guaranteed by the bond's conversion into equity.

A person familiar with the matter said the meeting was to take place yesterday and the possibility of lowering the bond's interest payments would be discussed.

Carige's failure to approve the capital increase triggered a stepping up of the coupon to 16pc from 13pc.

That represents €51m in annual interest, further stretching the loss-making bank's finances.

The fund's contributors are other Italian lenders that came to Carige's rescue at a time when the sector is under pressure from slowing economic growth and rising borrowing costs under the country's recently elected Eurosceptic government.

Carige or supervisory authorities can decide to convert the bond into equity if the bank's core capital falls below minimum requirements, a document on Carige website shows. The bank's capital ratio stood at 10.8pc at the end of September - above an ECB minimum threshold of 9.63pc, though the ECB will soon set a new threshold for Carige for this year.

Raffaele Lener, one of the three commissioners running Carige, said in a newspaper interview published yesterday that the bank had to negotiate "a different solution" with the fund given the current situation with the bond.

Reuters

Irish Independent

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