Monte Paschi Shareholders Approve $9.3 Billion Bad Debt Sale

(Bloomberg) -- Banca Monte dei Paschi di Siena SpA shareholders approved a major clean-up of soured debt on Sunday, as the Italian state tries to attract a buyer or merger partner for the rescued bank.

Investors backed the 8 billion-euro ($9.37 billion) sale of bad loans to state-owned asset manager Amco, the bank said in a statement on Sunday. That marks the completion of a transaction that Italy negotiated with European Union institutions for several months.

The Italian state promised to sell off its 68% stake in Monte Paschi by the end of 2021 as part of a pact with European authorities that allowed it to rescue the ailing bank in 2017. While the transfer to Amco will sharply reduce the bank's bad loan pile, a mountain of potential legal liabilities and its struggle to turn a profit will make it challenging for Italy to find a possible buyer or merger partner.

The bank's total legal risk of about 10 billion euros is a major hurdle to the sale of the stake owned by Rome. Monte Paschi also faces as much as 1.4 billion euros in liabilities related to a bad-loan securitization in 2018, il Messaggero reported.

The government paid 6.49 euros a share to bail out Monte Paschi in July 2017 and a value of 8.65 euros was attributed to each one held by investors required to share the burden of the rescue. The stock closed at 1.36 euros in Milan trading on Friday.

Italy has asked UniCredit SpA executives if they would be interested in buying the government's majority stake in Monte Paschi, people with knowledge of the matter said last month. Chief Executive Officer Jean Pierre Mustier won't consider any deal that isn't at least capital-neutral and that doesn't shield the bank from legal risks, some of the people had said.

©2020 Bloomberg L.P.