Paschi Said to Eye Fast $30 Billion Debt Sale After EU Nod

(Bloomberg) -- Banca Monte dei Paschi di Siena SpA wants an accelerated sale process of about 28 billion euros ($29.6 billion) of bad loans to start as soon as European authorities approve its new business proposal, according to people familiar with the matter.

Monte Paschi intends to sell all of the loans in a single block and it will only give bidders one month to analyze the debt before requesting bidding offers, said the people, who asked not to be identified because the plans are private. The bank may sell the portfolio for less than 25 percent of its gross book value, the people said.

“A fast deal is feasible because the portfolio is well known by the experts, but the real crux is how much discount the buyers wants,” said Vincenzo Longo, a Milan-based strategist for brokerage firm IG Markets Ltd. “It’s all about the price.”

The troubled Italian lender is drafting a new business plan that needs to be validated by the European Commission so the bank can get aid from the Italian government. State intervention became necessary after efforts to find anchor private shareholders failed in December. Under a previous plan, Monte Paschi was considering selling its bad loan portfolio through a securitization backed by the state at 33 percent of the gross book value.

Approval Pending

The EC, which is working with the European Central Bank and Italian authorities, will only approve the plan if it meets European regulations that seek to reduce state intervention in banks. The commission, which hasn’t said when it will approve Monte Paschi’s recapitalization, said Wednesday it’s moving along with the review.

Margrethe Vestager, the European Union’s competition commissioner, said banking regulators have answered the questions that allow them to move forward regarding the financial situation of Italy’s oldest bank.

The bank is already contacting international funds to gauge appetite for the debt, the people said. Sales of soured loans typically take several months, with at least two bidding rounds for interested parties.

A representative for Monte Paschi in Siena declined to comment on the plan.

Monte Paschi has about 46 billion euros of bad and doubtful debt on its balance sheet, representing 34.5 percent of all its loans as of December, according to company statements. That compares with an average of 16 percent for the other five largest Italian banks, according to data compiled by Bloomberg.

The EC approval of the new business plan will determine what size losses Monte Paschi can book as a result of the sale without breaching minimum capital requirements, the people said. That will help to determine the exact amount of bad loans it can ultimately dispose of, they said.

--With assistance from Francesca Cinelli

To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net, Luca Casiraghi in London at lcasiraghi@bloomberg.net.

To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net, Elisa Martinuzzi at emartinuzzi@bloomberg.net, Neil Denslow