Banca Monte dei Paschi di Siena lower as debt swap begins

Shares in stricken Italian lender Banca Monte dei Paschi di Siena continued sliding at the start of the week as it began a five-day €4.3bn debt swap meant to bolster its capital levels and open the way for a fund raising excercise by the end of 2016.

Bondholders were given five days beginning from Monday at 1300 GMT to exchange their debt, the bank said in a statement.

In parallel, the lender was shedding €28bn of bad loans and looking to embark on a reorganisation of its businesses.

Banca Monte dei Paschi di Siena was offering 100% on the face value of its junior Tier 2 notes and 85% for its subordinated Tier 1 notes.

The share sale on the other hand was due to start on 7 or 8 December and expected to be wrapped up before Christmas.

"While Italian officials are hoping that this will draw a line under the bank’s problems, the bank has already been bailed out three times previously. It is going to be increasingly difficult to generate any confidence in a rescue plan ahead of this week’s referendum vote, and while the bank continues to bear the crushing burden of its non-performing loan book.

"There is the added concern, if as expected the vote does go against the Italian Prime Minister, the resulting market uncertainty will make any sort of resolution that much more difficult, at a time when investors and traders start to step back as the year comes to a close," said Michael Hewson, chief market analyst at CMC Markets.

As of 1338 GMT shares in the lender were trading at €17.77 after having closed at €20.0 on 25 November.