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* Popolare Vicenza, Veneto Banca have requested state aid
* EU wants 1.2 bln euros in private money to clear rescue
* Sources dismiss possible private equity investment
By Pamela Barbaglia and Giulia Segreti
LONDON/MILAN, June 2 Private equity funds are
not interested in investing in the two Veneto-based banks Italy
is trying to rescue, sources said, as Popolare di Vicenza's
chief executive warned time was running out to secure a bailout
Italy has until the end of June to get European authorities
to agree to a state rescue of the two banks, which risk being
wound down under 'bail in' rules that would hit investors to
"The search for a solution to the crisis is dragging on in a
way that is unsustainable. What was sustainable a month ago
risks no longer being so in a month's time," Popolare di Vicenza
CEO Fabrizio Viola told Friday's Corriere della Sera.
To help its banks, which are weighed down by 350 billion
euros ($394.31 billion) in bad loans or a third of the euro
zone's total, Italy is attempting to rescue the two Veneto banks
and bigger rival Monte dei Paschi di Siena.
On Thursday it struck a preliminary deal over Monte dei
Paschi but the two Veneto lenders are struggling to find the 1.2
billion euros in private capital that sources said are needed to
get EU approval for the state intervention.
They must fill a 6.4 billion euro capital shortfall and have
asked for state aid under an exception to bail in rules which
would spare senior bondholders and large depositors.
Economy Minister Pier Carlo Padoan has said investors will
not be bailed in and sources say Rome is lobbying to halve the
amount of private capital needed.
Banking industry bailout fund Atlante, which spent 3.4
billion euros to save Popolare di Vicenza and Veneto Banca last
year, is refusing to stump up more money.
Corriere della Sera on Friday cited sources saying Italy
could present Brussels with a letter for an investment in the
two banks from private equity funds Atlas, Centerbridge, Warburg
Pincus together with hedge fund Baupost.
Italy's Treasury had no immediate comment.
The four funds had discussed with state-sponsored,
privately-funded Atlante a possible investment in Popolare di
Vicenza a year ago, but talks led nowhere.
A source close to one of the funds said they were no longer
interested in the two banks and there were no plans to reopen
the file. Separately, a market source close to Popolare di
Vicenza confirmed there were no talks ongoing with private
The source said buyout funds were repeatedly approached to
invest in the two banks but they had little appetite at a
multiple of 0.6-0.7 times the banks' book value.
Such levels are in line with the average for listed Italian
banks but the two Veneto-based banks are unprofitable. They have
lost a combined 8 billion euros in 2014-2016 and have warned
they expected to book further loan losses this year.
Viola, who was brought in by Atlante to oversee a merger of
the two banks, said they had 30 billion euros in healthy loans
that would have to be withdrawn in the event of a bail in,
dealing a "tremendous" blow to the local economy and would also
have repercussions at the political level.
Italy faces national elections this autumn or next year.
($1 = 0.8876 euros)
(Additional reporting by Andrea Mandala, Stefano Bernabei,
Giulio Piovaccari, writing by Valentina Za. Editing by Jane