MILAN (Reuters) - Italy's depositor protection fund on Tuesday kicked off a 900 million euro rescue process for troubled bank Carige (MI:CRGI) via the conversion of around 313 million euros ($350 million) of a bond into shares.
Genoa-based Carige, weakened by decades of mismanagement, risks collapse as a result of bad loans accumulated during Italy's recession that followed the global financial crisis a decade ago.
The bonds will be converted into shares worth the same amount, the fund's managing director Giuseppe Boccuzzi said, adding that the rescue plan envisaged a 700 million euro rights issue by Carige and a new convertible bond for 200 million euros.
Along with the fund, which is financed by Italian banks, the rights issue will be supported by cooperative lender Cassa Centrale Banca for around 70 million euros and Carige's current shareholders for an amount of up to 150 million euros.
The fund, known as FITD, will step in to subscribe to any part of the rights issue which Carige's shareholders do not take up, Boccuzzi said.
The remaining part of the right issue, around 160 million euros, will also be covered by FITD.
The convertible bond is expected to be sold to state-controlled banks Mediocredito Centrale and Credito Sportivo.
After at least two bailout plans fell through, the Europe Central Bank has given Carige until July 25 to come up with a solution. But source familiar with the situation said the deadline could be extended by a few days as the rescue plan was now being put in place.
