US bank JP Morgan is willing to provide 7 billion euros ($7.8 billion) in a bridging loan to a vehicle that would buy bad loans from Italy’s third-largest lender, Monte dei Paschi di Siena, an Italian daily said on Thursday.
In an unsourced report, Il Messaggero said Monte dei Paschi was expected to sell 26.6 billion euros in bad loans to the vehicle that would finance the purchase by selling bonds backed by the non-performing loans.
Italian bank rescue fund Atlante will buy the riskier portion of the new bonds while the senior tranche, worth 7 billion euros, would benefit from a state-backed guarantee that requires 4-6 months to be provided.
The loan by JP Morgan would allow the transaction to proceed while the issuance of the asset-backed notes is arranged.
JP Morgan had no immediate comment. Monte dei Paschi declined to comment.
Monte dei Paschi shares rose 4.5 percent in morning trade.
Il Messaggero said the loans, which Monte dei Paschi has written down by 63.3 percent, would be sold at a 70 percent discount, leading to a 4 billion euro capital shortfall.
Monte dei Paschi’s advisers, UBS and Citi, have reached out to around 15 international banks that would be willing to consider taking part in a recapitalisation, the paper said.
UBS and Citi could not be immediately reached for comment.