(Adds background, details)
By Andrea Mandala
MILAN Oct 18 Banca Monte dei Paschi di Siena
will press ahead with a JP Morgan-led rescue plan, it
said on Tuesday, envisaging a 5 billion euro ($5.5 billion)
recapitalisation and a sale of non-performing loans.
However, the Tuscan bank did not shut the door completely on
a rival capital-strengthening blueprint submitted last week by
veteran banker and former industry minister Corrado Passera.
Monte dei Paschi, which emerged as the weakest lender in the
latest round of Europe's stress tests this summer, needs to
raise cash and get some 28 billion euros of bad loans off its
balance sheet quickly to avert the risk of being wound down.
The bank spurned Passera's first, 11th-hour approach in late
July, opting instead for a salvage plan arranged by JP Morgan
which had won preliminary approval from the European
Since then however, the JPMorgan-led plan has stalled
because of scant investor interest, and Passera has come back
with a revised scheme which, according to sources close to the
proposed deal, has the backing in principle of private equity
funds including Warburg Pincus.
Tuesday's board meeting, which was called to examine
Passera's plan after he presented his new proposal to the bank
on Oct. 13, lasted eight hours - an indication he may have been
taken more seriously than in July.
Passera was also asked by market regulator Consob to explain
his plan on Tuesday.
Passera's proposal involves a 2.5 billion euro capital
increase reserved for private equity funds including Warburg
Pincus and a 1 billion euro share sale to existing Monte dei
"It could be a wonderful plan if it goes like it should,"
Passera said on his way in to the Consob meeting.
Monte dei Paschi shares were nearly 13 percent higher at the
close of trading on expectations Passera's scheme would get some
In a statement after its board meeting, the bank confirmed
its "firm" intention to press ahead with the JPMorgan deal and
present a business and capital-boosting plan to the market on
However, it said that after that date, the board would
proceed with an in-depth study of Passera's plan, already
started by advisers.
JPMorgan is now looking at a revised proposal which would
involve Monte dei Paschi raising up to 2 billion euros via a
debt-for-equity swap to be launched in November, according to
people familiar with the matter.
The bank would then launch a capital increase of up to 3
billion euros as early as Dec. 5, the day after a referendum on
constitutional reform that could topple Prime Minister Matteo
However, sources say JPMorgan appears to have so far failed
to find an anchor investor that would commit money to the
Detractors of Passera's plan in turn say his preliminary
proposal is non-binding, does not name any of the private equity
funds he claims are willing to invest, and is subject to due
Some sources expect the two sides to eventually strike a
compromise, but others say that is unlikely to happen given time
constraints and personal rivalries.
($1 = 0.9108 euros)
(additional reporting by Paola Arosio, Silvia Aloisi and
Massimiliano di Giorgio)