Fortress Investment Group and Elliott Capital Management dropped out of talks to buy bad loans from Banca Monte dei Paschi di Siena, complicating a government-backed rescue plan for the Italian lender, according to two people with knowledge of the matter.
Fortress and Elliott were the only international bidders for the riskiest tranches of Monte Paschi’s debt securitisation, backed by loans with a face value of about €26bn ($29bn), said the people, who asked not to be identified as the negotiations were private. The talks broke down over price, they said.
Quaestio, which runs Italy’s Atlante II bank rescue fund, has exclusive negotiating rights for the disposal of the assets until June 28. Giovanni Moccagatta, a spokesman for Quaestio, declined to comment.
Luca Grassis, a spokesman for Monte Paschi in Milan, wasn’t immediately available to comment. A representative for Elliott declined to comment. A Fortress official didn’t immediately respond to a phone call and email seeking comment. Reuters earlier reported the breakdown in talks.
Asset sales are a key part of a government-backed plan to restructure the bank with a capital injection from the state. The government and the European Union agreed to the plan earlier this month after Monte Paschi failed to shore up capital privately.
Italy’s government is seeking European regulatory approval of a similar strategy for troubled northern Italian lenders Veneto Banca and Popolare Vicenza. On Friday evening, the Italian cabinet approved regulation letting Veneto Banca suspend repayment on a bond that falls due next week.
The measure extends the deadline to repay subordinated debt issued by any bank that has requested a precautionary recapitalisation, according to an e-mailed statement. It only applies to securities maturing in the six months that follow the request for state intervention and aims to ensure that subordinated creditors are treated equally in case of public intervention.
The European Central Bank said Monte Paschi needs about €8.8bn in capital to bolster its balance sheet as it sells bad debt at a discount. The government would contribute about €6.6bn, according to a Bank of Italy calculation, with the rest covered by creditors.
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