(ZH) Italy Seeks Authorization To Raise National Debt To Fund Bank Bailouts, As

Italy Seeks Authorization To Raise National Debt To Fund Bank Bailouts, As BMPS Rescue Plan In Jeopardy

While Italy scrambles to conclude a private sector rescue of ailing Monte Paschi, which hopes to raise €5 billion in the form a share sale to anchor and retail investors, while at the same time the bank is underoing a debt for equity swap, moments ago Reuters reported that Italy's cabinet will meet later on Monday to authorise an increase to the national debt to cover the cost of saving Monte dei Paschi di Siena, should a public bailout be unavoidable, as well as other ailing banks, government sources said cited by Reuters.
As reported yesterday, Monte dei Paschi has launched a 5-billion-euro (4.2 billion pounds) capital increase and must raise the money by the end of the year or face being wound down. If it cannot find takers in the private sector, the government will be forced to step in.

Sources told Reuters last week that the government was ready to pump €15 billion euros - just under one percentage point of gross domestic product - into Monte dei Paschi and other ailing banks. Before it can do that, it needs authorisation to lift national debt levels, which it will do tonight at 7:30pm CET when the cabinet will meet with the Italian parliament to discuss increasing Italy's public debt to fund bank bailouts.
Meanwhile, after having soared in the early part of December following the failed Renzi referendum, Italian banks slid today on concerns over the successful conclusion of the Monte Paschi bailout.

The reason for today's selloff may be that, as Reuters also reports in a separate note, Monte Paschi is trying to resolve differences with a key investor over the 5 billion euro rescue plan. Monte dei Paschi has failed to find buyers for its shares so far Reuters notes, adding that on Monday, it shook the market again with a warning that Italian bank industry bailout fund Atlante was rethinking its 1.5 billion euro purchase of bad loans from the lender.
Atlante had expressed "deep reservations" in a Dec. 17 letter over the terms of a bridge loan that Monte dei Paschi had secured as part of the sale of bad loans, the bank said. Monte dei Paschi shares extended losses on the news, erasing a week's gains to trade down 7.7 percent at 19.3 euros each.
"If issues raised by (Atlante's manager) Quaestio cannot be solved, the operation could not be concluded by Dec. 31, 2016 as requested by the European Central Bank," the bank said in a statement.

However, Carlo Messina, chief executive of Intesa Sanpaolo one of Atlante's top contributors, said he believed the investment fund should go ahead with the deal and that it would reach a decision by Tuesday at the latest.
What makes the rescue problematic is that there are many moving parts, including not only the share sale and the debt-for-equity swap, but also a successfully executed bridge loan as well as the securitization, and sale of its nonperforming loans to third party investors.
As part of its own faltering rescue plan, Monte dei Paschi has taken out a 4.7 billion euro bridge loan with JPMorgan, Mediobanca (MDBI.MI), Credit Suisse and HSBC.
JPMorgan and Mediobanca have been working on the bank's rescue plan and have already come under fire from opposition politicians who object to them earning fees in the event of a state bailout, especially fees accruing on the bridge loan. Monte dei Paschi needs the loan to help complete the sale of bad debts, which are to be repackaged as debt securities worth 9 billion euros. The loan is worth around half of that, but it is secured against all the securities -- which is the source of concern for Atlante, said a source familiar with the matter.

>>> US Close Dow +0.20% S&P +0.20% Nasdaq +0.37% RUssell +0.55%

Closing Market Summary: Technology Sector Leads Stocks Higher

The stock market avoided its second consecutive decline thanks to a Monday session that was underscored by daylong strength in the top-weighted technology sector (+0.6%). The S&P 500 added 0.2% while the Nasdaq Composite (+0.4%) outperformed throughout the day.

Investor sentiment soured during late afternoon action after it was reported that nine people were killed and at least 50 were injured after an assailant drove a truck into a crowd at the Christmas market in Berlin. This followed a morning report from Ankara, where the Russian Ambassador to Turkey was assassinated by an off-duty Turkish policeman. The two developments likely contributed to afternoon profit taking.

Equity indices began the day near their flat lines, but the largest sector by weight—technology (+0.6%)—climbed shortly after the opening bell, leading the overall market higher. The advance received assistance from other groups like industrials (+0.6%), telecom services (+1.1%), and real estate (+1.0%), but technology stood out, keeping the Nasdaq in the lead. High-beta chipmakers contributed to the strength with the PHLX Semiconductor Index climbing 1.0%. ASML (ASML 110.22, +3.98) and Lam Research (LRCX 106.99, +2.54) climbed 3.8% and 2.4%, respectively, after receiving upgrades.

Other cyclical sectors were mixed relative to the broader market as industrials (+0.6%) settled higher while energy (-0.5%) and financials (+0.1%) lagged.

The industrial sector received support from transport stocks as the Dow Jones Transportation Average gained 0.7% with all but two components ending in the green. Meanwhile, energy (-0.5%) struggled amid a volatile day in crude oil. WTI crude alternated between gains and losses before ending higher by 0.3% at $52.12/bbl.

For its part, the financial sector (+0.1%) held a modest loss into the afternoon, but spiked off its low after Fed Chair Janet Yellen made upbeat comments about the U.S. labor market. The comments were made during the commencement ceremony at the University of Baltimore, and they were met with an uptick in the dollar and a brief slip in Treasuries.

The U.S. Dollar Index (103.11, +0.16) climbed 0.2% as greenback strength against the euro (1.0400) and the pound (1.2400) overshadowed a decline against the yen (117.11).

Treasuries entered the day with gains and continued their advance into the afternoon. A temporary downtick took place in reaction to Ms. Yellen's comments, but the complex returned to highs by the close with the 10-yr yield sliding six basis points to 2.53%.

Investor participation was in-line with average as more than 900 million shares changed hands at the NYSE floor.

Today's session was free of economic data and investors will not receive any economic data tomorrow.

  • Russell 2000 +20.8% YTD
  • Dow Jones Industrial Average +14.1% YTD
  • S&P 500 +10.7% YTD
  • Nasdaq Composite +9.0% YTD

Reuters - Exclusive: U.S. proposed $5-7 billion penalty for Credit Suisse on tox

Exclusive: U.S. proposed $5-7 billion penalty for Credit Suisse on toxic debt - http://reut.rs/2i2qfHp

By Joshua Franklin, Oliver Hirt and Karen Freifeld | ZURICH/NEW YORK
The U.S. Department of Justice has asked Credit Suisse to pay between $5 billion and $7 billion to settle a probe over its sale of toxic mortgage securities in the run-up to the 2008 financial crisis, a source with knowledge of the matter said, but the bank has resisted settling for that amount.

The size of the suggested settlement indicates that the cost to the bank may be higher than analysts had expected and explains why Credit Suisse management has been pushing for a smaller penalty.

"Credit Suisse is confident of reaching a better solution," said the person with knowledge of the discussions. Should talks break down, U.S. legal authorities could sue the bank, prolonging the uncertainty.

In a sign that negotiations may be reaching their final stages, U.S. Attorney General Loretta Lynch last week talked with top management from Credit Suisse, another person familiar with the matter said, adding that a resolution could come as soon as this week.

None of the sources were authorized to speak publicly about the talks.

Credit Suisse and the Department of Justice declined to comment.

The penalty stems from a 2012 initiative launched by U.S. President Barack Obama to hold banks accountable for selling mortgage debt while misleading investors about the risks, a practice that helped cause the worst economic crisis since the 1930s.

The penalties, which for U.S. banks reached $46 billion, are set to deliver another setback to European lenders, many of which remain fragile, with scant capital, in the wake of the financial crash.

After record settlements were reached with U.S. banks such as Bank of America and JPMorgan, the focus has turned to Europe's Deutsche Bank, Royal Bank of Scotland, Credit Suisse, Barclays, UBS and HSBC.

News in September that the Justice Department made an initial demand of Deutsche of $14 billion to settle its case sent the German lender's stock plummeting and raised fears Credit Suisse could also face a stiffer penalty.

Just prior to Deutsche confirming that the Department of Justice was seeking $14 billion, JP Morgan analysts estimated Credit Suisse's fine at around $2 billion.

Deutsche Bank could this week agree its penalty over the sale of toxic mortgage debt, one person with direct knowledge of the matter said on Monday. The bank has said it expects to pay materially less than $14 billion.

Credit Suisse's litigation provisions at the end of 2015 totaled 1.605 billion Swiss francs ($1.56 billion). In November, the bank said it had upped litigation provisions by 357 million francs, mainly in connection with mortgage-related matters.

President-elect Donald Trump will take office

on Jan. 20, which means key government players involved in the negotiations would change, complicating the banks' efforts to reach settlements.

>>> Vivendi to increase Mediaset stake up to 30%

Vivendi to increase Mediaset stake up to 30%

Vivendi [EPA:VIV] announced on April 8, 2016 that it had concluded a strategic and industrial partnership with Mediaset [BIT:MS]. As a first step, Vivendi was to acquire 3.5% of Mediaset’s share capital and 100% of the share capital of the Mediaset Premium pay-television company, in exchange for 3.5% of Vivendi’s share capital. The envisaged Mediaset Premium acquisition unfortunately led to a lawsuit and Vivendi’s proposals aimed at finding an amicable solution to the dispute were not agreed by Mediaset and its shareholder Fininvest.
As Vivendi believes that the strategic interest of the industrial partnership announced on April 8, 2016 supersedes the stakes of the lawsuit, Vivendi decided to become Mediaset’s second largest industrial shareholder by acquiring, to begin with, 20% of the Mediaset share capital.
Following a meeting between Arnaud de Puyfontaine, Chairman of the Management Board, and Pier Silvio Berlusconi, Chief Executive Officer of Mediaset, on December 16, 2016, and the press release issued by Mediaset on December 17, 2016, and considering Fininvest’s recent positions, Vivendi’s Management Board met today and decided, with the Supervisory Board’s authorization, to increase its investment in Mediaset by acquiring additional shares depending on market conditions within the limits of 30% of the share capital and voting rights.
Vivendi reminds that its presence in the Mediaset equity is in line with the Group’s intention to develop its activities in Southern Europe and its strategic ambitions as a major international, European-based, media and content group.