September 7, 2017 / 3:04 PM / 10 months ago

Italian banking fund to invest 640 mln euros in rescue of 3 small banks-sources

ROME, Sept 7 (Reuters) - An Italian banking fund will spend some 640 million euros to bolster three small regional lenders and buy a portion of their bad loans so they can be taken over by French lender Credit Agricole, two sources said on Thursday. Credit Agricole is buying the Cesena, Rimini and San Miniato savings banks for 130 million euros but wants them cleared first of their bad loans, worth around 3 billion euros gross.

Under a plan drawn up by Italian authorities to avert their collapse, the country’s Interbank Deposit Protection Fund - which is financed by domestic banks - will pump 427 million euros into the three lenders buying into a capital increase, the sources said.

The fund will also spend an additional 213 million euros to buy the junior tranche of the banks’ bad loans, which are set to be repackaged as securities and sold.

The mezzanine tranche will be worth 634 million euros, with bailout fund Atlante II and state-owned company SGA expected to invest some 400 million euros. The remainder of the money still needs to be found, the sources said.

The senior tranche will be worth 416 million euros and will be financed either through a bridge loan or a private placement, the sources said. It will benefit at later stage from a state guarantee known as GACS.

Credit Agricole, which has been in talks with the Bank of Italy and the banking deposit fund for months over the planned acquisition, has set a Sept. 15 deadline to reach a deal. ($1 = 0.8324 euros) (Reporting by Giuseppe Fonte, writing by Silvia Aloisi)

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