October 5, 2017 / 9:46 PM / 15 days ago

Monte Paschi to launch offer to swap retail bondholders' shares

MILAN, Oct 5 (Reuters) - Italy’s Monte dei Paschi di Siena said on Thursday it planned to launch a voluntary public offering on behalf of the state to swap shares former retail bondholders had been given as part of a state bailout into senior debt.

The Tuscan bank, the world’s oldest still in business, was kept afloat earlier this year thanks to a state rescue package totaling some 8 billion euros ($9.4 billion).

Under the plan, Monte dei Paschi issued new shares to all subordinated bondholders whose debt was converted into equity to meet European Union rules shielding taxpayers by imposing losses on investors in the event of a rescue.

The Treasury however committed to compensate retail bondholders who had bought the bank’s junior debt without being fully aware of the risks, pledging to spend 1.5 billion euros to buy their shares.

In a statement on Thursday, Monte dei Paschi said the shareholders tendering their stock would receive senior debt issued by the bank maturing May 15, 2018 for an amount of up to 1.536 billion euros.

As a result of the transaction the Treasury’s stake in Monte dei Paschi will rise to 67.76 percent from its current 52.18 percent, it said.

The government has said it planned to hold its shares with a long-term aim of making a profit on its investment.

A senior source close to the matter said on Thursday Monte dei Paschi shares, suspended since last December, were expected to restart trading in the second half of October.

Monte dei Paschi turned to the state for a bailout in December last year after failing to raise 5 billion euros on the market to shore up its capital.

EU authorities approved the state recapitalization at the beginning of July after the bank agreed to a drastic overhaul including job cuts and a bad loan clean-up.

The bank’s second-biggest shareholder is insurer Generali which holds a 4.3 percent stake after the mandatory conversion of subordinated bonds it held. ($1 = 0.8539 euros) (Reporting by Stephen Jewkes; Editing by Andrew Hay)

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