Mps, the three possible pathways for the 40 thousand bondholders – The Sun 24 Hours

Sell immediately on the market, sell to the bank, and subscribe to the increase, keep in your pocket and wait for the natural expiration date of the securities (running the risk of a possible resolution). For the 40 thousand bondholders to retail, these are the three possible answers that you can give to the proposed “purchase voluntary with compulsory reinvestment”, which yesterday made available the first documents.

Mps, funds in the maneuver on the bond of General studies the conversion

First of all, the reasons for the operation: why Mps decided to knock on the door of the bondholders? Because the plan for the restructuring and revitalization of the institute, which involve, inter alia, the securitisation of 27.6 billion of gross impaired loans, need an injection of fresh capital by 5 billion. The market is unlikely to support it by only subscribing to the new shares, and so it is thought to involve the holders of the subordinated bonds. Also those in retail, even within the framework of an operation is complicated and risky, and may want to be involved in the options offered by the bank, equal to that of institutional investors.

Second, the securities involved: Mps has launched an offer to purchase on 11 bond subordinated to a total nominal value of € 4.3 billion, among which stands out the bond 2008-2018 2.1 billion euros, specifically designed and authorized to be placed with retail customers.

the Third point, the price: to get the subscribers you pull up at a premium compared to current market values which are exchanged. For securities in Tier 1 capital, the most risky, the proposal of conversion is 85% of the nominal, while for the bond Tier II conversion is at par, with the exception of a small obligation to which the repurchase will be offered 20% of the nominal value.

Mps: conversion to 11 bond, 50% in the hands of small savers

Then, the three alternatives for the holders of the bonds. You may decide to participate by delivering the securities to the bank and reinvesting necessarily in the capital increase the amount collected: you can change the type of the asset, moving to a more risky, where you do not know the possible trend post-conversion, but you will benefit from a price higher than the one applied by the market. The other hypothesis, is to sell immediately in the market: in that case, the sum intascata – currently lower than that offered by the bank, but it is said that in the next few days the two values are not aligned – can be reallocated where it is believed. The third and last way: to keep the titles until the natural expiry, and therefore focusing on the full repayment of what is signed at the time; one scenario, the latter, in theory, more prudent, even if it is the same bank, remember that, if the conversion operation (which is linked to the increase in cash, and the securiti zation of the loans) did not go to port, you profilerebbe the risk of a resolution and all the instruments connected to it, including the forced conversion of the subordinated securities.

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