By Valentina Za, Giuseppe Fonte and Pamela Barbaglia
MILAN (Reuters) -Monte dei Paschi di Siena has secured backing from most of the banks that are due to guarantee its 2.5 billion euro ($2.4 billion) share issue after racing to persuade investors to buy in, three people close to the matter said.
With markets gripped by fears about recession, conflict in Ukraine, inflation and higher rates, the eight banks due to underwrite the MPS sale had refused to take on the risk without reassurances about how much stock they could be left holding.
By late on Wednesday six banks, including global coordinators Bank of America (NYSE:BAC), Citigroup (NYSE:C), Credit Suisse and Mediobanca (OTC:MDIBY), had signed the guarantee contract, the sources said.
Among the four bookrunners, Barclays (LON:BARC) and Societe Generale (OTC:SCGLY) have already committed, unlike Santander (BME:SAN) and Stifel, two people said. None of the lenders had immediate comment.
The two banks still remaining are expected to join in overnight or at the latest on Thursday once they get approval from internal investment committees, two of the sources added.
Five years after an 8.2 billion euro ($8 billion) bailout that handed the state its 64% stake, MPS plans to raise the extra cash to lay off staff and bolster capital.
Italian taxpayers will provide up to 1.6 billion euros, while the rest must come from private investors in order to meet European Union state aid rules.
The eight banks due to underwrite the MPS issue are willing to backstop only a third of the 900 million euro private portion of the capital raising, one of the sources said.
They have demanded written commitments from investors for an amount roughly equivalent to half the overall figure, accepting pledges which are not in writing for the rest to get to two thirds of the total, the source added.
MPS CEO Luigi Lovaglio had until recently not produced the written commitments, triggering a race in the last few days to get all the necessary documents signed.
If the missing signatures arrive overnight MPS's board would convene to approve the terms of the rights issue on Thursday, after being forced to postpone a meeting originally scheduled for Tuesday.
A delay may force it to review the timeline of the offer, whose prospectus Italian market regulator Consob is at present expected to approve in time for its launch on Monday.
The Tuscan bank has so far secured support from its insurance partner AXA, local banking foundations and asset manager Anima Holding.
Investors in the share issue, according to one of the sources, are also set to include French businessman Denis Dumont and Italian financier Davide Serra, who are both close to Lovaglio from his time at small bank Creval.
After rising through the ranks at UniCredit to lead the Italian banking group's former Polish unit Bank Pekao, Lovaglio returned to Italy to steer Creval toward a takeover by France's Credit Agricole (OTC:CRARY).
Failure to get an underwriting contract on Tuesday prompted selling of MPS' riskier junior bonds, which have seen their prices sink to roughly half their face value amid concerns it may have to resort to a debt-for-equity swap.
The yield on the September 2030 Tier 2 bond closed at 34.39% on the Tradeweb platform, up from 32.93% on Tuesday, but below a session high of 36.72%.
A January 2030 bond yielded 41.68% at closing after spiking to 45.44% from 39.95% on Tuesday.
($1 = 1.0303 euros)