When one month ago, Italy was scrambling to unveil a “last resort” bad bank bailout fund (which eventually received the name Atlante, or Atlas, for the Titan god who was condemned to hold up the sky for eternity, only in this case he is holding up Italy’s €360 billion in bad loans), many wondered why the rush? While the explicit purpose of the fund was to allow Italy to bailout insolvent banks without the involvement of the state which is expressly prohibited by the Eurozone, the scramble appeared erratic almost frentic, and was one of the reasons why Italian bank stocks tumbled in early February.
The question: “Does someone know something?”
It turns out the answer was yes, because as we learn today, “Atlas” is about to become the proud new owner of around 90% of Italy’s Popolare di Vicenza after investors only bought a fraction of the mid-tier bank’s €1.5 billion IPO, Reuters reports.
Alessandro Penati, chairman of the Quaestio investment firm which manages the fund, said Atlante would aim to sell any stake it may get in Vicenza after 18 months. Good luck with finding buyers unless the ECB is openly monetizing bank stocks by then, which at the rate Mario Draghi is going (and especially if he listens to advice from JPM) is a distinct possilbity.
According to Reuters, it was not immediately clear whether Popolare di Vicenza, which must raise the cash to comply with capital requirements set by the European Central Bank (ECB), would have enough free float to list on the market next week as planned. The minimum free float required to list is 25 percent of the share capital, but the Milan bourse can make exceptions.
The fund targets an annual return of around 6 percent and will spend 70 percent of its cash to invest in cash calls at ailing banks, he said. He added that the rest would be used to buy junior tranches of bad debt from banks at a higher price than that offered by funds specialised in distressed securities, but not at book value – meaning banks would have to book further writedowns.
Full article: Italy’s Bank Bailout Fund Already One Third Empty After First Bank Rescue (Zero Hedge)