Troubled Genoa-based banking group Carige‘s capital increase is starting today on the Italian Stock Exchange and will end next December 13th. At the same time, the sale of a 2.8 billion euro NPEs portfolio to Government-controlled credit management company AMCO will be possible as well as the issue of subordinated Tier 2 bonds.
Infact, Italy’s financial markets supervisory Authority Consob yesterday approved the prospectus relating to the offer to shareholders of ordinary shares coming from the third tranche of Carige’s capital increase (see here the Carige press release), approved by the shareholders’ meeting last September 20th ( see here the press release of that time).
The capital increase is set in the context of the broader capital strengthening maneuver, approved by the bank’s extraordinary commissioners in order to comply with the prudential supervisory requirements and provide for the relaunching of the institution, as well as forcing it out from the extraordinary administration procedure and to reconstitute the ordinary administrative bodies. The maneuver provides for a capital increase of 700 million euros, the sale of impaired loans for 2.8 billions and the issue of sub-subordinated Tier 2 bonds for 200 millions. The maneuver is based on the binding framework agreement signed on 9 August by the Bank Commissioners and Cassa Centrale Banca Credito Cooperativo Italiano – CCB, the Interbank Deposit Protection Fund – FITD and the FITD – SVI Intervention Voluntary Scheme. The capital increase is divided into tranches destined respectively for: a) 313.2 million to SVI against the conversion of subordinated bonds subscribed in November 2018; b) for 63 million to CCB; c) 85 million to the current shareholders of the bank in proportion to the percentage of capital held; d) for 238.8 million to the FITD (see the press release at that time).
With regard to the sale on non-performing loans, yesterday evening AMCO specified that the NPEs portfolio subject to the sale is made of UTPs as for a 60% stake, including some significant single names, and for the remaining is made of non-performing loans, while the overall price of the transaction is approximately one billion euros (see the AMCO press release here).
The note also states that “the effectiveness of the sales contracts (one relating to the leasing portfolio and one relating to the remaining part of the transferred portfolio), signed between AMCO and Banca Carige on 15 and 16 November, is conditional on the completion of the bank’s capital increase. Authorization to proceed with the transaction The transfer of the ‘leasing portfolio’ included in the transfer perimeter is subject to the fulfillment of some conditions precedent, at strained for 2020 “.
AMCO has also “presented an offer, which may be accepted by Banca Carige by the end of February 2020, for the granting of a synthetic protection of a portion of risk on a performing loan portfolio characterized by greater risk (so-called high risk portfolio) of approximately 1.2 billion euros The guarantee can be completed by 31 March 2020 and will have a duration of 5 years, against the payment by Banca Carige of quarterly premiums The offer also provides that AMCO will manage in quality of servicer the positions included in the high risk portfolio that were reclassified as NPE on the basis of a contract that will be defined between the parties “.
At the conclusion of the operation, the assets under management of AMCO will increase from 20.6 billion to 23.6 billion, thus creating economies of scale in asset management.
Carige’s capital strengthening operation was orchestrated after the bank’s last rescue attempt by international investors. Last June, in fact, the Interbank deposit protection fund had rejected the last offer on the table by the Apollo Global Management fund (see here a previous article by BeBeez), which followed the failure of the negotiations with Blackrock. The other possible counterparts, besides Apollo, were said to be Warburg Pincus and Varde (see here a previous article by BeBeez). But even those talks did not come to something concrete.
The press release from Carige finally warns that in the first six months of 2019, the group reported a negative net result of 428.5 million euros while at 31 December 2018 it was negative for 272.8 million. In the second half of the year, furthermore, as a result of the sale of the impaired portfolio, further write-downs will be recorded on loans (including those relating to impaired exposures represented by leasing and a large exposure position). Finally, the fourth quarter of 2019 will be affected by the effects on personnel costs of the actions aimed at reducing the workforce, as envisaged in the industrial plan. The net economic result of the 2019 financial year will therefore still be significantly negative and expected to lose 779 million euros in the Strategic Plan.