MILAN (Reuters) - Italian banks have agreed a rescue plan for Carige (MI:CRGI) led by the country's depositor protection fund (FITD), which will shoulder the bulk of a 900 million euro ($999 million) cash injection.
Aimed at avoiding a liquidation or resolution of the bank, the plan requires the backing of Carige's shareholders, who will meet on Sept. 20 to approve the proposed capital increase.
Following is a summary of the bank's situation and the rescue plan:
WHY DOES CARIGE NEED RESCUING?
Weakened by decades of mismanagement, Carige was placed under temporary administration by the European Central Bank on Jan. 2 after its top investor - the Malacalza family of steel entrepreneurs - in December blocked a 400 million euro cash call.
Carige's administrators have been trying to attract interest from potential bidders but negotiations have proved difficult. A rescue led by BlackRock (N:BLK) collapsed in May.
Rome has sought to stave off a liquidation while avoiding an injection of taxpayer funds, as the previous government did with both Monte dei Paschi di Siena (MI:BMPS) and two Veneto-based lenders in 2017.
This has left the burden of rescuing Carige with Italian banks, which already in November bought a 320 million euro convertible bond through the FITD fund to prop up Carige.
WHAT ARE THE MAIN ELEMENTS OF THE PLAN?
The plan envisages a 700 million euros share issue and 200 million euros of new Tier2 capital.
Carige said on Monday it would issue 700 billion new shares at 0.001 euros each.
The FITD fund, financed by the country's banks, will cover almost two thirds of the capital strengthening by converting into equity 313 million euros of the bond it bought from Carige in late 2018 and by buying new shares for 239 million euros.
The FITD has also pledged to take on any shares left unsubscribed by Carige's current shareholders, who can buy into the cash call for up to 85 million euros.
Carige has said it has received binding commitments by several investors for its 200 million euro Tier 2 issue.
ROLE OF CASSA CENTRALE BANCA
The FITD cannot be a long-term investor in Carige and unlisted cooperative banking group Cassa Centrale Banca (CCB) has an option to buy the FITD's stake at a deep discount between mid-2020 and the end of 2021.
CCB has emerged as the only Italian bank willing to make a direct investment in Carige after others said they were not interested unless the state bankrolled the deal. CCB will initially invest 63 million euros for a stake of just under 10% in Carige.
SOURED LOANS
Under the plan, Italy's state-owned bad loan specialist SGA will purchase almost all of Carige's impaired loans for a total of 3.1 billion euros, lowering their share of total lending to below 5%.
WHAT WILL THE MALACALZAS DO?
It is not yet clear whether the plan has the backing of the Malcalzas, who own 27.5 percent of Carige and could sink the proposed rescue as they blocked the previous capital raising.
($1 = 0.9007 euros)