Exclusive: Italy picks Bank of America and Orrick to advise on MPS privatization, sources say

[November 21, 2020]  By Giuseppe Fonte, Pamela Barbaglia and Valentina Za

ROME/LONDON/MILAN (Reuters) - Italy's Treasury has picked Bank of America and Orrick as financial and legal advisers to secure a merger deal for bailed-out bank Monte dei Paschi (MPS) as part of its privatisation plan, four sources close to the matter told Reuters.

Rome aims to clinch a merger with a healthier peer in 2021, the sources said, to provide a long-term solution for the bank, which has been backed by the government since 2017 following an 8 billion euro ($9.5 billion) rescue deal.

The mandates, which will last 12 months, will see Bank of America's co-head of the financial institution group, Giorgio Cocini, and Orrick's partners Patrizio Messina and Marco Nicolini working closely with the Treasury to attract buyers and address the bank's capital shortfalls.

Rome is expected to pay about 150,000 euros in financial and legal fees, with the lion's share going to Bank of America, the sources said.

Italy's Treasury and Orrick were not immediately available for comment, while Bank of America declined to comment.

Dogged by legal claims and poor quality assets, MPS is a tough sell in Italy's banking market, which has a surplus of branches and has seen a rise in loan losses and remote banking in the COVID-19 pandemic.

A man walks in front of the Monte dei Paschi bank in Siena, central Italy, January 29, 2016. REUTERS/Max Rossi/File Photo

UniCredit is seen as the preferred buyer for the 548-year old bank given its robust balance sheet, sources have said, despite boss Jean Pierre Mustier ruling out mergers which, he has said, only add "branches and staff."

Italy's third-largest bank, Banco BPM, is in the process of exploring possible tie-ups and may also emerge as a viable bidder for MPS, one of the sources said.

Banco BPM has also repeatedly denied any interest for MPS.

Any deal for the Tuscan bank would only come after the Treasury acts to remove legal claims amounting to 10 billion euros, while also injecting fresh capital.

Rome has set aside 1.5 billion euros to shore up MPS but the bank faces a shortfall of at least 2 billion, sources have said.

Its capital buffers are set to fall below minimum requirements early next year, hit by the cost of a bad loan clean-up it is about to complete as well as provisions against legal risks following the conviction of former top executives.

(Reporting by Giuseppe Fonte, Pamela Barbaglia and Valentina Za; Editing by Mark Potter)

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