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UPDATE 4-Italy's Carige struggling with cash call as ECB deadline looms
November 16, 2017 / 12:04 PM / in a month

UPDATE 4-Italy's Carige struggling with cash call as ECB deadline looms

* Had agreed with ECB it would raise cash by year-end

* Failed to sign underwriting accord with CS, Deutsche, Barclays

* Says has investor commitments, working to secure banks’ backing (Adds bank’s statement)

By Valentina Za and Stephen Jewkes

MILAN, Nov 16 (Reuters) - Italy’s Banca Carige said on Thursday it had failed to secure underwriters for a 560-million-euro ($660-million) share issue, which is a key European Central Bank demand for the lender to safeguard its future.

Carige’s difficulty in finding backing for its cash call is a reminder of persistent problems in Italian banking following a deep recession, despite repeated state bailouts of troubled lenders over the past year.

Shares in Carige did not trade on Thursday but news of its troubles hit some rivals. Shares in Creval, which has just announced plans to raise 700 million euros - or 4.4 times its market value - via a share issue, closed down 19 percent.

After calling an extraordinary board meeting to assess whether its restructuring plan could proceed and if the cash call could be delayed, Carige said Chief Executive Paolo Fiorentino would continue to work on Friday to secure an “essential” underwriting accord.

“The CEO has informed the board of progress in talks with key shareholders, institutional investors and banks in the consortium,” Carige said.

The bank said commitments from investors willing to buy into the share issue totalled so far around 11.75 percent of capital, or 328 million euros based on Reuters calculations, and more were in the process of being finalised.

In addition, top shareholder Malacalza Investimenti said it had sought regulatory approval to raise its stake to 28 percent from 17.6 percent and it would support Carige, despite recent misunderstandings with banks in the consortium.

Malacalza has invested 264 million euros to build its current stake since 2015, when Carige last sold new shares at 1.17 euros each. The stock is worth less than 15 euro cents now. Another local businessman is the bank’s second biggest shareholder with 6 percent.

Carige has warned that its business could be at risk if the restructuring plan, which also includes asset disposals and a debt swap, does not go through.

Analysts are concerned that failure to launch the rights issue or find a white knight could lead to it being wound down, with the taxpayer or the banking sector picking up the bill.

“Given current market conditions, we do not rule out Banca Carige will be put under resolution,” Milan broker Akros said, adding a separation of good and bad assets could ensue with the bank being recapitalised by the state.

Investment banks Credit Suisse, Deutsche Bank and Barclays had conditionally agreed to underwrite Carige’s share issue, but Carige said the agreement could not yet be fulfilled. It did not elaborate, but has previously said the deal depended on a number of clauses including positive investor feedback.

Credit Suisse, Deutsche Bank and Barclays had no comment.

ALL ROADS LEAD TO ROME

Rome has this year rescued larger rival Monte dei Paschi di Siena and liquidated two failing regional banks in Veneto, committing up to 23 billion euros of public money.

Like these banks, Carige has been hit by bad loans and poor management. It is heavily exposed to the northwest region of Liguria, which suffered badly during a long recession that ended in 2014, and has lost nearly 3 billion euros since 2013.

Carige’s shares have lost roughly half of their value over the past year and it is now worth less than 130 million euros.

This is Carige’s third cash call since 2014, when it was found short of capital in an industry check-up by the ECB which has given the lender until the end of December to boost capital. ($1 = 0.8495 euros) (Additional reporting by Andrea Mandala, Luca Trogni, Stefano Bernabei, Danilo Masoni; editing by Jason Neely/Alexander Smith/Andrew Heavens)

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