SOVEREIGN DEBT RESTRUCTURING | MASTERCLASS

A deep dive masterclass on sovereign debt restructuring, to be conducted virtually by Asian high yield bond expert Florian Schmidt.

30 June 2022 (Thu), 5pm Singapore/HK time

According to Bloomberg sources, the bondholders of the world’s oldest bank, Banca Monte dei Paschi di Siena SpA are likely to be protected from any losses in case of a take over by UniCredit. The news comes as UniCredit is negotiating with the Italian government to buyout the bank, which was bailed out by the government in 2009. The deal has had its ups and downs with the Italian government refusing conditions attached by UniCredit’s new CEO Andrea Orcel mid last month. The refusal was around the cancellation of bancassurance and consumer credit agreement as these were considered too costly despite the Treasury offering favourable terms. However, later in the month Banca Monte had reached an agreement with the Monte dei Paschi foundation to reduce its legal liabilities (compensation claims) by €3.8bn ($4.5bn) removing a major obstacle in the sale. As the negotiations progress, UniCredit and the Italian Treasury are looking at options to safeguard the interests of the debtholders of Banca Monte and could include UniCredit assuming the liabilities of the junior bonds.
Bloomberg notes, “The parties have already approved the prerequisites for a transaction that has to ensure capital neutrality, the exclusion of Paschi’s bad loans and all the extraordinary litigation, as well as adequate protection from other potential credit risk.” Analysts have warned of potential risks to the junior debt holders of Banca Monte as the deal is still to undergo due diligence by UniCredit. However, the Italian government needs to exit the bank by the end of this year due to a deadline imposed by the European Union.
 
Banca Monte’s 5.375% 2029s and 8.5% 2030s are down 0.5 and 2.68 points to trade at 79.5 and 88.41 respectively. The bonds have fallen from ~90 levels in June after uncertainty surrounding the deal and the associated risks to the debt and have been fluctuating in the mid 70s and mid 80s range over the last month.
For the full story, click here
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