- Monte Paschi Bailout In Peril As 3 Banks Walk Out: Are More “Pensioner Suicides” Next?
by Tyler Durden, www.zerohedge.com
Two days ago we reported that in a last ditch effort to prevent potential contagion within its banking system, one including bank runs and furious ordinary investors and depositors, ahead of Friday’s stress test announcement which Italy’s troubled Monte Paschi is widely expected to fail, Matteo Renzi’s government was racing to organize a private bailout of the insolvent bank. Specifically, as of Monday night, the Italian government was, according to the FT, racing to secure a privately backed bailout of Monte dei Paschi di Siena, including a plan to raise €5 billion of fresh capital so as to avert nationalisation.
There was no assurance this last ditch effort would succeed, especially in light of Monte Paschi’s market cap which has dropped to a paltry €800 million, suggesting that the bailout would be an effective “out of court” bankruptcy, structured as a quasi investment, with fresh money coming in from the new equity owners diluting existing stakeholders over 90%.
There was also no assurance that any new funds would not meet the same fate as the €8 billion in capital already raised over the past two years, money which has since “vaporized” in the seemingly endless hole of Monte Paschi bad debt.