MILAN, March 15 Bonds issued by Popolare di
Vicenza and Veneto Banca slid further on Wednesday on
uncertainty over whether Italy can pull off a state bailout of
the two troubled regional lenders as a key deadline nears.
Settlement offers aimed at appeasing small shareholders who
lost money in the two banks expire in a week and a high take-up
is needed for the state rescue to go ahead.
Veneto Banca said on Friday the take-up of its offer was at
42 percent of targeted shares. Popolare di Vicenza had reported
a few days earlier a take-up of 30 percent - well below the
banks' 80 percent goal.
Italy is discussing with European authorities a 5 billion
euro ($5.3 billion) rescue scheme for the two lenders. They must
be deemed viable and have their restructuring plan approved by
Brussels to unlock state aid.
Failing this, the banks would have to be wound down and
senior bondholders and large depositors would bear losses under
"bail in" rules aimed at shielding taxpayers, which Italian
authorities fear could hurt the wider banking system.
A state rescue under the "precautionary recapitalisation"
scheme being proposed entails losses only for shareholders and
Popolare di Vicenza and Veneto Banca together have 950
million euros in junior debt and 13.5 billion euros in senior
unsecured debt, part of which is held by retail investors.
Thousands of ordinary Italians who held shares in the two
lenders saw their savings wiped out last year when the two
Veneto-based banks were rescued by state-sponsored,
privately-funded banking industry bailout fund Atlante.
To stave off lawsuits from angry shareholders, Popolare
Vicenza and Veneto Banca launched settlement offers whose
outcomes are key for the state bailout.
They are proposing repaying 169,000 shareholders, who bought
stock in the last 10 years, around 15 percent of investment
losses if they agree not to pursue legal action.
EU authorities are unlikely to authorise a state investment
in the banks if legal risks remain significant, sources have
An October 2018 Popolare di Vicenza senior bond
yielded 25.5 percent late on Wednesday from 22
percent the previous day.
The yield on a December 2025 Veneto Banca bond
due in May 2019 was 18.6 percent, up from 16.7
percent the previous day.
That compares with yields of around 90 percent on some of
the banks' junior bonds.
"We saw some selling from small hedge funds early this
morning and others followed suit," a Milan-based bond trader
said. "We think the current price (of around 75 percent of
nominal value) is quite close to levels that fairly reflect
The bonds traded at around 90 percent of their face value in
January when credit analysts at JPMorgan sounded alarm bells
over bail-in risk for senior bondholders.
($1 = 0.9407 euros)
(Reporting by Valentina Za and Andrea Mandala; Editing by Mark