* Bank needs money to offload bad loans
* Capital raising gets 96 percent of votes at meeting
* Italy's Dec. 4 referendum hurdle to bank's plans
(Adds CEO comments)
By Stefano Bernabei
SIENA, Italy, Nov 24 Shareholders in Monte dei
Paschi di Siena approved a 5 billion euro ($5.3
billion) share issue on Thursday, the third cash call in as many
years to keep Italy's third-biggest lender afloat.
The Tuscan bank, the world's oldest still in business, needs
to raise more than seven times its market value in cash in order
to sell bad loans and boost capital after industry stress tests
in July singled it out as Europe's weakest.
New Chief Executive Marco Morelli told shareholders he had
showcased the bank's rescue plan to more than 250 investors,
including hedge funds and sovereign wealth funds, in the 70 days
since taking office, but had failed to obtain any firm backing.
Weighing on investors' mind is a constitutional referendum
on Dec. 4 which could topple Italy's reformist government and
usher in a period of political instability.
The Monte dei Paschi banking foundation - which used to
control the bank and now owns just 0.7 percent of it - said on
Thursday it would like to wait until after the vote before
deciding whether to invest further in Monte dei Paschi.
Morelli, the former head of Bank of America Merrill Lynch in
Italy, is aiming to raise the money this year to cover losses
from the planned sale of 28 billion euros in gross bad loans.
The CEO told reporters a window existed for the capital
increase to start around December 7-8 and to close before the
If the plan falls through, Monte dei Paschi would need state
support to survive.
Under tougher new European Union rules on bank bailouts,
public aid can only come after hitting investors first.
Hundreds of ordinary Italians have already lost their
savings in a string of bank crises following a deep recession
that saddled lenders with 356 billion euros in soured debts.
Around 150,000 small shareholders hold 55 percent of Monte
dei Paschi's capital. Italy's Treasury is the top investor with
a 4 percent stake it received as payment for lending the bank
money during the financial crisis.
Monte dei Paschi, which has burned through 8 billion euros
of capital raised in 2014-2015, worked hard to gather proxy
votes and ensure Thursday's meeting reached a necessary 20
Shareholders representing 22.4 percent of the bank's capital
were present at the meeting and the fundraising plan got 96.1
percent of votes.
To cut the size of the new share sale, Monte dei Paschi is
offering to convert up to 5.3 billion euros in debt into equity.
Morelli said the swap would be launched on Monday and run
for five days if market watchdog Consob approves.
Italian insurer Generali, which holds Monte dei
Paschi subordinated debt, said on Wednesday it wanted to play a
part in finding a solution for the Tuscan lender.
But Morelli said he had not met with the Generali CEO on the
Shares in Monte dei Paschi, which have lost 80 percent of
their value this year, closed up 3.3 percent at 0.23 euros.
(1 = 0.9471 euros)
(Writing by Valentina Za; Editing by Alexander Smith and Elaine