http://www.zerohedge.com/news/2013-09-09/monti-paschi-faces-bail-capital-needs-point-nationalization
Submitted by Tyler Durden on 09/09/2013 08:32 -0400
Monti Paschi Faces Bail-In As Capital Needs Point To Nationalization
Just as we warned 4 months ago, the oldest bank in the world now faces a critical need to raise EUR2.5 billion in fresh capital - more than double its original plan. "There is no chance on the planet that they can raise [this] in 12 months... they are heading towards nationalization," exclaimed one investment banker, confirmed by another who added via Reuters, "it will be difficult to find someone to shell out all that money." The capital raise is equivalent to the entire market cap of the bank currently and it is becoming increasingly clear that the Italian state will be forced to provide the equity. The problem (for BMPS bondholders and depositors) is that under such a scenario, as Bloomberg notes, EC State Aid rules regarding a subordinated-debt bail-in could apply. However, given the small size of sub-debt in the capital structures, it is unclear who will get the haircut including senior bondholders and depositors.
...The size of the planned capital increase, which matches the current market capitalization of the bank and was announced by the economy ministry late on Sunday, underlines the problems still confronting Monte Paschi.The bank could fall under direct state control if it cannot raise sufficient funds from shareholders."There's no chance on the planet that they can raise 2.5 billion euros on the market within 12 months. They are heading towards nationalization,"..."I don't see how the market could take the news well today. It will be difficult to find someone to shell out all that money as it's not an insignificant amount," a Milan trader said.Some analysts said the bank's best option to avoid nationalization could be a debt-to-equity swap, converting subordinated bonds it has already issued into shares."That would be a hit for bond holders and also for shareholders, but at least it would be fairer on taxpayers and it would be in line with the new bail-in guidelines for banks,"...As well as the capital hike, the Monte Paschi plan also includes new cost cuts and a gradual reduction in the bank's huge government bond portfolio which totaled 29 billion euros at the end of June...
But, as we previously noted, a glance at the capital structure makes it very clear that there will be much more pain in the capital structure than simply sub-debt holders...
A quick glance at BMPS' capital structure shows that there isn't a whole lot (read: almost any) of impairable securities below the unsecured liability (i.e., deposit) level.It is also obvious that when the bad debt impairment begins and depositors start getting whacked at least senior bonds, which should be pari passu, will feel the pain too as per the Diesel-BOOM doctrine, although we doubt this particular case of pain sharing will bring much comfort to any and all uninsured depositors in the oldest bank in the world.
So it's time to apply that non-template 'template' it would seem
http://www.reuters.com/article/2013/09/09/italy-berlusconi-idUSL5N0H40XI20130909
* Senate committee begins considering Berlusconi expulsion
* Future of government at risk if centre-right leader forced out
* PM Letta warns over "permanent chaos" in Italian politics
By James Mackenzie
ROME, Sept 9 (Reuters) - A special committee of the Italian Senate meets on Monday to consider expelling Silvio Berlusconi following his conviction for tax fraud, a decision that could shatter the fragile ruling coalition and plunge Italy into fresh political crisis.
Senior figures in Berlusconi's centre-right People of Freedom (PDL) party have threatened to pull out of Prime Minister Enrico Letta's government if Berlusconi is stripped of his seat in the Senate.
The process that could lead to at least temporary political exile for the 76-year-old billionaire may take weeks. With tensions high between partners in the governing coalition, open conflict at Monday's meeting could trigger a crisis.
The 23-member panel, with representatives from the main parties, is dominated by Berlusconi adversaries. At least 14 lawmakers are likely to vote in favour of expulsion.
Financial markets have been increasingly on edge as political tensions have escalated ahead of the meeting, driving up government borrowing costs.
With Italy struggling with a 2 trillion euro public debt and mired in its longest recession since World War Two, business leaders warned that political turmoil could snuff out the first glimmers of a turnaround.
"Political stability is a pre-condition for economic recovery, and if there were to be a crisis, the recovery would be at risk", Federico Ghizzoni, chief executive of Unicredit, Italy's largest bank by assets, said at the weekend.
So far, Letta's centre-left Democratic Party (PD) has insisted that Berlusconi cannot remain in parliament after Italy's top court convicted him of being at the centre of a vast tax fraud scheme at his Mediaset television empire.
The PDL says Berlusconi, sentenced to four years in jail, has been targeted unfairly by left-wing magistrates and accuses the PD of using judicial tactics to eliminate a rival it has been unable to defeat politically.
PROCEDURAL DELAYS
The complicated committee rules may avert an immediate showdown between the centre-left PD and Berlusconi's centre-right PDL, which were forced together in an unwilling coalition after deadlocked elections in February.
The committee is due to meet at 3 p.m. (1300 GMT) with proposals from PDL member Andrea Augello on how to organize the proceedings, which may make clear whether or not there is any margin for a compromise.
Berlusconi's lawyers argue that the "Severino law", under which convicted politicians are ineligible for parliament, cannot apply in Berlusconi's case because it was passed last year.
Berlusconi's lawyers have appealed to the European Court of Human Rights. They want the Senate committee to postpone proceedings until the European Court decides or Italy's constitutional court rules on whether the law is valid.
That possibility has been rejected by the PD, which accuses the PDL of trying to waste time with groundless appeals.
As the manoeuvres continue, President Giorgio Napolitano, who has played a decisive behind-the-scenes role in Italian politics since the Berlusconi crisis erupted, may play a significant part again.
He has made it clear that he would be unwilling to call new elections and may seek to shepherd in a new coalition government if the centre-right withdraws support for Letta.
Whatever the outcome of the committee meeting, Berlusconi faces months in the political wilderness, which could prevent him from standing in any election if the government falls.
His four-year jail term, commuted to one year because of his age, would also prevent his participation in national politics if elections are called this year.
No comments:
Post a Comment