Monte dei Paschi

Banca Monte dei Paschi di Siena (MPS) was unmistakably clear when spelling out the terms of a debt-for-equity swap this week: if bondholders don’t volunteer to be bailed in, the bank will be placed in resolution and they will have no choice. But creditors are not the only ones who are worried as the world’s oldest lender teeters on the brink — the whole Italian banking system is holding its breath.

Banca Monte dei Paschi di Siena laid out the terms of an offer to retail bondholders to swap their subordinated debt for equity this week. High participation in the liability management exercise is essential if the bank is to complete a planned €5bn capital increase and avoid being placed in resolution.

Credit investors, whether in cash or synthetics, often welcome corporate restructurings by distressed firms. Job cuts, rationalisation of operations and, in particular, asset sales are usually regarded as bondholder-friendly actions.

Banca Monte dei Paschi di Siena’s tier two bonds received a boost this week, after it confirmed it was pressing on with its rescue plan but would not rule out Italian banker Corrado Passera’s new proposal for a way to raise €5bn of capital without involving bondholders.

Credito Emiliano will look to sell a tier two bond in the euro market, joining fellow Italian lender Credito Valtellinese in the FIG subordinated debt pipeline this week.

Banca Monte dei Paschi di Siena’s decision to offset its €5bn capital raise with a debt for equity swap will likely affect retail bondholders, once again raising questions about the investor base’s role in the capital markets.

Banks showed a clear preference for dollar-denominated primary issuance in the third quarter, as the euro market grappled with heightened volatility.

KKR-backed Pillarstone, the non-performing loan acquisition and advisory company, has picked a chief operating officer after starting operations last year.

The world’s oldest bank has trodden a 500-year line between the sacred and the profane.

Intesa Sanpaolo beat analysts’ earnings expectations for the second quarter and came out shining in last week’s stress tests. Though its pile of non-performing loans is still growing, the bank has escaped the asset quality and capital adequacy fears that dog Italy’s other large banks.

As Banco Espírito Santo (BES) creditors await compensation after a bridge bank was established to bring forward the collapsed lender’s healthy assets, retail investors are increasingly being granted extra protection in cases of bank failure in Europe.

Shares in Banca Monte dei Paschi di Siena, have fallen by as much as 17% since the bank unveiled plans for its rescue on Friday, which include a €5bn rights issue.