Everything has to be redone for the rescue of Genoa-based distressed bank Carige. In fact, Us asset manager Blackrock, late on Wednesday, told the extraordinary commissioners of the bank Pietro Modiano, Fabio Innocenzi and Raffaele Lener that the fund no longer intends to conduct the investment they have been working on for months. And yesterday morning the official press release of Carige came out with the official news (see the press release here). A cold shower which, according to BeBeez, didn’t arrive unexpectedly, for those who know how Blackrock works.
In fact although it the asset manager would have invested with one of its alternative closed-end funds dedicated to special situations, in Italy it is very present on the open funds front and is therefore very sensitive to the reputational aspect, compared to other international investor colleagues in distressed assets. BeBeez was told from sources that it that was precisely the renewed increase in reputational risk in the last ten days that pushed the top managemenent of the US asset manager group to head back and get out of a situation that at the image level was becoming too dangerous. The risk was linked to the fears of the trade unions of possible mass job cuts downstream of the agreement with Blackrock, cuts that the commissioners have strongly denied that were going to happen. However those fears spread out and had a very loud echo on the media. And all reputational risk was at the moment all on Blackrock’s shoulders, given that the possible co-investors were not yet official names to spend. That risk was evidently deemed too large compared to the expected return on investment.
The turnabout came paradoxically just when all the pieces of the puzzle were getting together. On Monday 6 May, in fact, the Volunteer Scheme of the Deposit Protection Fund approved the conversion to capital of the 320 million subordinated Tier 2 bonds subscribed by the Scheme in 2018, which was the first step in the series to arrive at the envisaged recapitalization of 720 million euros. Subsequently, in fact, Blackrock and other co-investors would have subscribed the rest of the capital increase, also involving the Malacalza family, which currently owns 27.8% of the bank and which could have been committed for 70-80 million. After the deal, the funds of BlackRock and the co-investors would have had 45%, the Voluntary Scheme 35%, the Malacalz’s 10% and the remaining 10% would have been floating. The agreement on these points was found last April 24 during a meeting at the Bank of Italy’s headquarters in Rome in which Fabio Panetta, deputy general director of via Nazionale, the representatives of the alternative special fund situation of BlackRock, the leaders of the Voluntary Scheme and the commissioners (see here a previous post by BeBeez).
The Carige press release explains that at this point “assessments are continuing regarding further market solutions aimed at ensuring stability and relaunch of Banca Carige”. And it seems that the dossier is now in the hands of four specialized funds, three of which were dealing with the co-investment with Blackrock. But the first problem is time. The ECB has requested the submission of binding offers by 17 May.
The press release, however, recalls that “in any case, the provisions of Title II of the Legislative Decree of 8 January 2019 remain, which allow for the possible start of the procedure for the precautionary recapitalization request to the Ministry of the Economy“, such as the one decided for Montepaschi, aimed at solvent banks with deficits in the adverse stress test scenarios. The decree gave authorization to the Ministry of the Economy to subscribe Carige shares up to a maximum of one billion euros. The preventive recapitalization would involve the burden sharing with the cancellation of the shareholders and the conversion of the subordinated bond signed by the Voluntary Scheme. Instead, the bail-in would not take place and therefore senior bondholders and depositors over 100k euros would not be involved (those below the threshold are always guaranteed).
