Banca Carige Lays Out Action Plan to Avoid State Intervention

(Bloomberg) -- Banca Carige SpA’s special administrators laid out a turnaround plan including the sale of state-backed bonds and soured debt to secure the bank’s future and avoid a precautionary recapitalization.

The Genoa-based bank is “about to activate” a state guarantee on bond issues to boost its mid-term funding, Carige said in a statement on Tuesday. The lender will also start working to cut its non-performing loans to 5 percent to 10 percent of total lending and is renegotiating the terms of a 320 million-euro ($366-million) bond sold to Italy’s deposit guarantee fund at the end of November.

“The business plan that will be presented by the end of February 2019 will foresee a credible path not only from the point of view of operational sustainability but also in terms of attractiveness for an aggregation,” Carige said in the statement.

Faced with the bank’s potential failure, Italy’s cabinet approved measures to support Carige’s liquidity and funding and signaled its support for possible recapitalization in an urgent, nighttime meeting Monday. A recapitalization is a “residual option,” Carige said.

The European Central Bank took the unprecedented step of placing Carige in temporary administration after the lender’s main investor blocked a vital capital increase in late December, leaving the it without one of the two pillars of a turnaround plan approved by the ECB. Special administrators were given a three-month mandate to reduce balance-sheet-risk and find a possible partner for the bank.

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