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Monte Paschi shareholders approve cash call delay

SIENA, Italy--Troubled lender Monte dei Paschi di Siena was forced to delay a vital 3-billion-euro (US$4.1 billion) share sale to raise capital until mid-2014 because of shareholder opposition, plunging its turnaround plan into uncertainty.

The world's oldest bank had to take 4.1 billion euros in state aid earlier this year after being hammered by the euro zone debt crisis and loss-making derivatives trades.

Italy's third biggest lender needs the cash call — the size of which is bigger than the bank's market value - to repay the state bailout and avert nationalization.

Its management, led by Chairman Alessandro Profumo and CEO Fabrizio Viola, wanted to launch the rights issue in January but were defeated at a shareholder meeting on Saturday after the bank's top investor voted against their proposal.

The unprecedented clash between the lender's executives and its main shareholder — a charitable banking foundation with close links to Siena politicians — cast a pall over a tough restructuring meant to revive its fortunes.

Sources close to the matter said Profumo, a strong-willed and internationally respected banker who was formerly the chief of UniCredit, might resign.

Profumo had already secured a pool of banks ready to guarantee the rights issue, but only if it was carried out by end-January.

He said delaying it would make fundraising harder because it would likely coincide with a string of cash calls by other Italian and European lenders, and could precipitate the Tuscan bank's nationalization.

“Today we are certain we can pull it off. If we delay it, we enter in an area of uncertainty,” Profumo said.

But the cash-strapped Monte dei Paschi foundation — whose stake is big enough to veto any unwanted decision - forced a postponement to win more time to sell down its 33.5-percent holding and repay its own debts.

An aide described the 56-year-old Profumo, who quit UniCredit in 2010 after clashing with that bank's foundation shareholders and joined Monte dei Paschi in April 2012, as “very annoyed.”

He said on Saturday a board meeting was already scheduled for January and he would make up his mind on whether to step down then.

“These are decisions one takes in cold blood and in the right place,” he said.

Italian newspapers said former European Central Bank executive board member Lorenzo Bini Smaghi and Carlo Salvatori, who sits on the board of German insurer Allianz, were among possible candidates to replace him if he steps down.

Antonella Mansi, a feisty 39-year-old businesswoman recently appointed head of the Monte dei Paschi foundation, said her insistence on a cash call delay did not amount to a no-confidence vote in the bank's management.

Mansi said that carrying out the capital increase in January would massively dilute the foundation's holding, leaving it with virtually nothing to sell to reimburse debts of 340 million euros.

“We have a precise duty to ensure (the foundation's) survival. You can't ask us to let it collapse,” she said.

Analysts however said a delay, and the possibility of Profumo resigning, might undermine the whole rescue of Monte dei Paschi.

“It's important to carry out the capital increase as early as possible,” said Roberto Lottici, fund manager at Ifigest. “The risk is that the bank finds itself rushing into a cash call later at a lower price than what it could achieve now.”

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