The plan of a group of four international investment funds was not pursued by Rome along with more recent approaches to be part of a rescue deal after the funds offered to inject 1.6 billion euros ($1.79 billion) of fresh capital into two ailing Italian banks in Veneto at the end of May, reported Reuters quoting sources.
The sources, who declined to be named as the matter is confidential, said that a rescue proposal for Banca Popolare di Vicenza and Veneto Banca on May 30 was submitted by investment firms Sound Point Capital, Cerberus, Attestor and Varde.
Partly due to its expertise with troubled Greek banks, they picked Deutsche Bank to work on the deal.
However, recent attempts made by the funds to contact the Italian Treasury and restate their interest in the deal went unanswered the proposal and the proposals was subject to due diligence but was not followed up on by Rome.
With retail bank Intesa Sanpaolo set to buy their good assets for 1 euro, the government is expected to start liquidation proceedings for the two banks on Friday or Saturday.
Using taxpayers’ money to take on the lenders’ soured debt, the state is likely to foot the bulk of the bill.
Offers to pump in an overall 1.6 billion euros of capital was made by the consortium led by U.S. hedge fund Sound Point Capital – who has former Goldman Sachs chairman Stephen Friedman as a limited partner.
Reuters reported that a 300 million euros into their shares and about 1.3 billion euros going into new tier one and tier two bonds that the banks would issue to them, was included in the proposal.
Reuters reported that the funds never got a formal response even though the offer was briefly discussed with the Italian Treasury in early June. Therefore, it was a surprise when rep[orts of a possible deal with Intesa came up.
In the event that the biggest Italian banks formed an investment vehicle and led the rescue of the Veneto banks, the funds told the Treasury they had the flexibility to work on an alternative proposal and team up with Italian lenders Intesa and UniCredit in mid-June.
Reuters however reported, quoting sources, that the Treasury ignored their interest.
While the Italian Treasury, the Veneto Banks, Cerberus, Attestor and Varde were not immediately available for comment, the Bank of Italy, Deutsche Bank and Sound Point Capital declined to comment.
Sources said that a 15 percent stake in the two banks and control their governance, were hoped to be taken by the four funds as part of the deal.
“Having control of the governance and management team was a key point,” one source said, adding this might have put off the Treasury.
Popolare Vicenza boss Fabrizio Viola, a former CEO of Monte dei Paschi, who would have played a leading role had the plan succeeded, worked closely with the four funds, sources reportedly said.
Due to concerns senior bondholders and large depositors would be hit with heavy losses, there was concern that the two banks would be closed down under European banking rules and Italy has tried for weeks to prevent the winding down of the banks which have a capital shortfall of 6.4 billion euros.
However, Rome failed to convince other, healthier lenders, to stump up funds to salvage them.
(Adapted from Reuters)