Monte Paschi to issue $15.8 billion in debt after EU approves support: Paper

The headquarters of Banca Monte dei Paschi di Siena SpA, the oldest surviving bank in the world and Italy's third-largest bank.

Matt Clinch | CNBC
The headquarters of Banca Monte dei Paschi di Siena SpA, the oldest surviving bank in the world and Italy’s third-largest bank.

Italy’s Banca Monte dei Paschi di Siena, which is being bailed out by the state, plans to issue 15 billion euros ($15.8 billion) of debt next year to restore liquidity and boost investor confidence, several newspapers said on Friday.

The debt sales would be supported by government guarantees which form part of a liquidity scheme for banks in need which the European Commission has agreed to extend for six months.

Under EU state aid rules, banks with a capital shortfall cannot benefit from general liquidity support schemes, meaning the Commission takes decisions on a case-by-case basis, as it did for Monte dei Paschi.

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According to daily La Repubblica, Monte dei Paschi would issue the debt in the form of bonds and commercial paper. A third of that debt would have a short-term maturity date, while the rest would mature in three years, it added.

The bank could not immediately be reached for comment.

Monte dei Paschi, Italy’s third biggest lender and the world’s oldest, had to ask Rome for help after failing to win investor backing for a share issue meant to keep it afloat.

The bank said on Monday the European Central Bank had estimated its capital shortfall at 8.8 billion euros, compared with a 5 billion euro gap previously indicated by the bank.

The Treasury may have to put up around 6.6 billion euros to salvage the lender, including 2 billion euros to compensate around 40,000 retail bond holders, the Bank of Italy said on Thursday, while the rest will come from the forced conversion of the bank’s subordinated bonds into shares