Monte dei Paschi to launch share issue this week

Troubled Italian bank Monte dei Paschi di Siena said it would offer new shares between Monday and Thursday in a last ditch attempt to raise €5 billion in capital this year and avoid a state bailout.

Monte dei Paschi said its share offer for institutional investors, which accounts for 65% of the total, would run until 1pm GMT on Thursday.

The offer reserved for current shareholders and retail investors will end instead at 1pm GMT on Wednesday.

In a bid to raise funds, Monte dei Paschi has also extended a voluntary debt-to-equity offer to retail investors owning €2.1 billion of its junior debt. The offer runs to 21 December.

Italy is ready to step in to rescue the country’s third-largest bank should the fundraising plan fail.

Under new rules Europe introduced in the wake of the financial crisis to shield taxpayers, investors in a failing lender must bear losses before public money can be tapped.

A source familiar with the matter said on Friday a state bailout of Monte dei Paschi would entail a forced conversion of €4.1 billion worth of subordinated bonds into shares.