Monte dei Paschi retail bondholders set to receive €1.5bn after being forced to take shares

 
Oliver Gill
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MPS Bank Former Management Fined Five Million Euros
Monte dei Paschi's history can be traced back to the fifteenth century (Source: Getty)

Retail bond investors in the world's oldest bank, Monte dei Paschi di Siena, are set to be reimbursed by the Italian government in the coming weeks.

The debt holders were forced into swapping their bonds for shares in the troubled Tuscan lender earlier this year on the proviso that the Italian finance ministry would buy the shares back at a future point.

In a statement released late last night, Monte dei Paschi said the three-week auction could start before the end of October.

The earlier bondholder bail-in was part of a wider €8bn (£7.2bn) state-backed rescue of Monte dei Paschi.

Read more: Why Monte shares might get kicked from their index tomorrow

Retail investors were promised compensation totalling €1.5bn from state authorities. In yesterday's statement, Monte dei Paschi said it would issue senior debt to those retail investors affected which can be cashed in on 15 May 2018.

Once the shares are swapped, the Italian treasury's shareholding in Monte dei Paschi will rise from 52.18 per cent to 67.76 per cent.

Monte dei Paschi turned to the state for a bailout last December after failing in its plan to raise €5bn from the markets. Shares in the lender have been suspended ever since, although a senior source told Reuters they are expected to restart trading during October.

European authorities signed-off the state aid in July on condition that the bank agreed to job cuts and cleaning up its toxic loan portfolio.

Read more: Monte dei Paschi bailout: EU can sign-off state aid

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