Carige, capital increase at the start: here is all the information

Banca Carige's 700 million capital increase is underway, a fundamental part of the restructuring plan set up to save the Ligurian bank, which also includes the sale of NPE loans for an amount of around 2,8 billion and the issue of Tier 2 Subordinated Bonds for an amount of 200 million. Consob, while expressing several reservations, has approved the information prospectus and therefore this morning, December 4, the offer started. The recapitalization operation will conclude at 14 pm on Friday 13 December and will have strong effects on Carige's shareholders. To date, the controlling shareholder is in fact the Interbank Fund. “After these operations, our bank will rank among the first in Italy both in terms of capital ratios and risk indicators. The controlling shareholder will be the Interbank Fund (FITD) with a share between 73% and 82%. The second shareholder will be Cassa Centrale Banca with a share of 9%, but with the right to purchase all the shares of Fitd and therefore to rise to a share between 82% and 91%. The current shareholders will hold a stake of between 9% and 19%”, reads the documents signed by the extraordinary commissioners, Pietro Modiano and Fabio Innocenzi, who, once the increase has been completed, will leave the scene, leaving Cassa Centrale and Fitd with the task of appointing the new top management. 

For the technical details, the capital increase has as its object the subscription of 700 billion new shares, at a unit price of 0,001 euro for a total value of 700 million euro. The first tranche of the transaction will be reserved for the Voluntary Scheme of the Interbank Deposit Protection Fund, to service the conversion of the Carige Bond subscribed in 2018, while the second tranche will concern Cassa Centrale Banca. A third tranche will be offered as an option to shareholders and a fourth tranche will finally be allocated to Fitd. 

According to what emerges from the document published by Carige, Consob, while approving the recapitalization, advised caution, inviting the Genoese institute to clarify that "theThe implementation of the capital strengthening is a necessary but not sufficient condition for the purposes of a going concern perspective”. To date, in fact, there are no certainties as to whether Carige will be able to achieve the objectives indicated in the strategic plan to 2023 because "most of the assumptions underlying it are uncertain as they are beyond the control of the issuer's directors".

Upon request, Consob Carige also recalls that Carige shares have been suspended on the stock exchange since 2 January and that "there is a risk that following the increase, the securities will not be readmitted to trading if the free float were to be less than 10%". Therefore, it concludes, "there is a risk of illiquidity of Banca Carige shares".

In this context it should be remembered that Carige is facing the fourth rescue attempt in six years. Since 2014, explained the extraordinary commissioner, Fabio Innocenzi, the institute burned 98,3% of the 2,2 billion euros deriving from recapitalizations carried out previously. In the first six months of 2019, the group reported a negative net result of 428,5 million while as at 31 December 2018 it was negative by 272,8 million. Furthermore, in the second half of the year, as a result of the sale of the impaired portfolio, further write-downs on loans will be recorded (including those relating to impaired exposures represented by leasing and a large exposure position). Finally, the fourth quarter of 2019 will be affected by the effects on personnel expenses of the actions aimed at reducing the workforce, as envisaged in the aforementioned Business Plan. The net economic result attributable to the Issuer for the 2019 financial year will therefore still be significantly negative and expected to be a loss in the Strategic Plan for 779 million. Although the components underlying the forecast of this economic result have undergone significant changes - specifies Carige in the Auc prospectus - this forecast remains substantially valid and, at the date of the prospectus, stands at a loss of 783 million".

At the same time it was announced that, once the increase was concluded, Carige will sell to Amco (formerly Sga) a portfolio of non-performing loans for a gross book value of approximately 2,8 billion made up of approximately 60% of positions classified as unlikely to pay (UTP loans) and the remainder of non-performing loans. The total price of the operation is approximately one billion. "The effectiveness of the transfer contracts (one relating to the leasing portfolio and one relating to the remaining part of the portfolio being transferred), signed between Amco and Banca Carige on 15 and 16 November, is conditional on the completion of the increase in capital of the Bank”, underlines Amco in a note. The former Sga also presented an offer - which may be accepted by Banca Carige by the end of February 2020 - for the granting of synthetic protection of a portion of the risk on a performing loan portfolio characterized by a higher risk of approximately 1,2 .XNUMX billion.