March 29, 2018 / 6:50 PM / a year ago

Carige's top investor questions cash call's backstop accords

GENOA, Italy (Reuters) - The top investor in Banca Carige (CRGI.MI) questioned on Thursday backstop accords with investors that last year allowed the Italian lender to meet regulatory demands to raise capital.

Speaking at an annual general meeting, a representative for Malacalza Investimenti (MI) asked the bank’s top management for an explanation and more details on the backstop deals.

Genoa-based Carige sold 544 million euros ($669 million)of new stock last December. Its shareholders, many of whom are small investors who were left out of pocket after backing two previous cash calls, took up only 66 percent of the share sale.

The Italian bank however had struck accords with a number of investment firms who took on unsold shares as part of deals to buy other assets.

MI is the investment vehicle of Vittorio Malacalza, a local businessman who owns 20.6 percent of Carige.

Carige Chief Executive Paolo Fiorentino said the capital raising had been challenging and was carried out amid strong regulatory pressures.

“The fact that backstop guarantees were activated shows the operation was very risky,” he said.

Fiorentino arrived at Carige in mid-2017 after Malacalza ousted the previous CEO Guido Bastianini. Fiorentino drew both criticism and praise among investors on Thursday.

MI complained about insufficient cost cuts and urged Fiorentino to return the bank to profit this year, as envisaged by the business plan.

Malacalza’s representative also took aim at the cash call’s costs and Carige’s announcement, on Nov. 16, that it had failed to sign an underwriting accord for the share issue, which he said made depositors panic.

However, a rival investor in the bank, WRM Group of Italian financier Raffaele Mincione, praised Fiorentino’s work.

“In the light of statements made at today’s shareholder meeting, we want to reiterate our support for the CEO who has done a great job,” a representative for WRM said.

Mincione recently emerged as one of Carige’s leading shareholders with a 5.4 percent stake. He has said he could raise his stake to 9.9 percent and wants to steer the lender towards a merger with a mid-sized rival.

Fiorentino told shareholders a merger was inevitable though the process was unlikely to start before next year.

“I don’t expect Carige will be able to stay out of the consolidation round ... but one needs to join in looking smart and so we will,” he said.

London-based Chenavari and Italy’s Credito Fondiario, a bank and bad loan specialist, have bought into the cash call as part of deals to take on - respectively - Carige’s consumer credit unit and its bad loan business.

($1 = 0.8137 euros)

Writing by Valentina Za; Editing by Alexandra Hudson

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