(Repeats Monday story without changes)
* Govt to seek approval to borrow 20 bln euros for banks
* Must raise 5 bln euros in capital, sell bad loans this
* Government ready to step in if plan falls through
* Atlante agrees to go ahead with investment
By Valentina Za and Stephen Jewkes
MILAN, Dec 19 The Italian government decided on
Monday to seek parliamentary approval to borrow 20 billion euros
to underwrite the stability of its wobbly banking sector,
starting with a likely bail-out of No. 3 lender, Monte dei
Paschi di Siena, as early as this week.
Monte dei Paschi, recently judged the weakest of the
European Union's major banks, needs to dispose of a mountain of
bad loans and raise 5 billion euros in capital by the end of
this month or else face the risk of being wound down by the
European Central Bank.
Italy's Economy minister said on Monday the money it was
seeking could be used to guarantee adequate liquidity in the
"These resources could also be used as part of a programme
to boost capital at banks," he said in a press conference.
A government bailout could come as early as this week, if
Monte dei Paschi fails to pull off its own privately funded
But it could prove to be politically explosive for the
week-old administration of Prime Minister Paolo Gentiloni, given
that investors are required to bear losses under EU bailout
Earlier on Monday, however, the bank received some rare good
news in relation to its faltering rescue plan. A key investor
that was reconsidering its commitment to the plan issued a
statement saying that its concerns had been resolved.
"(Quaestio)... has agreed to approve the Term Sheet for the
senior bridge loan as agreed with the financing banks," the
investor, private bank rescue fund Atlante, said.
Atlante has committed to spending 1.5 billion euros to buy
some of Monte dei Paschi's bad loans, despite having expressed
"deep reservations" in a Dec. 17 letter over the terms of a
bridge loan that Monte dei Paschi had secured as part of the
sale of bad loans.
Even with Atlante's commitment to participate in the private
rescue bid, Monte dei Paschi is still not assured to raise
enough money to avoid the need of a state bailout.
Its 5 billion euros cash call is meant to conclude on
Thursday, but is not underwritten by a consortium of investment
Monte dei Paschi shares closed before both Atlante's
statement and the government's announcement, having lost 11
percent and wiped out a week's gains.
Under a state bailout, the government would inject capital
into Monte dei Paschi only after the forced conversion of 4.1
billion euros worth of subordinated bonds into shares, a source
said on Friday.
As part of its own rescue plan, Monte dei Paschi has taken
out a 4.7 billion euro bridge loan with JPMorgan,
Mediobanca, Credit Suisse and HSBC,
said another source, familiar with the loan.
JPMorgan and Mediobanca have been working on the bank's
rescue plan and have already come under fire from opposition
politicians who object to them earning fees in the event of a
state bailout, especially fees accruing on the bridge loan.
Monte dei Paschi needs the loan to help complete the sale of
28 billion euros of gross bad debts, which are to be repackaged
as debt securities worth 9 billion euros.
The loan is worth around half of that, but it is secured
against all the securities -- which was the source of concern
for Atlante, said a source familiar with the matter.
Atlante, whose shareholders include Italy's top banks and
insurers as well as state-owned entities, is due to buy a 1.5
billion euro tranche of the securities.
It could see its notes claimed by the four banks if the
bridge loan is not repaid. ($1 = 0.9579 euros)
(Additional reporting by Paola Arosio and Crispian Balmer;
Editing by Mark Bendeich/Keith Weir/Anna Willard)