MPS will issue 374 new shares for every three shares held. Credit: Austin Distel on Unsplash.

Italian banking group Monte Dei Paschi di Siena (MPS) is moving ahead with its plan to launch €2.5bn rights offer after it received support from a group of investors.

The embattled bank will sell each of the shares at €2. It will also issue 374 new shares for every three shares held in a sale that will begin on 17 October 2022.

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The country’s finance ministry will participate for 64% of the planned sale, or equivalent to €1.6bn, as per its stake in the bank.

Global coordinators of the offer include Bank of America, Citigroup, Credit Suisse and Mediobanca.

Barclays, Societe Generale, Stifel and Santander are the bookrunners of the offer.

As much as €807m of the issue will be covered by underwriters.

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In addition, MPS’ insurance joint-venture partner AXA will provide up to €200m of the capital.

London-based fund Algebris will also provide €50m.

The latest development comes shortly after a Reuters report that said Italy is negotiating with European Union regulators on overhauling efforts of MPS and the sale of bank to a private player.

MPS has found itself in the middle of a banking fiasco after an unfortunate acquisition just before the 2008-2009 global financial catastrophe.

The bank is leveraging growing interest rates and savings from layoffs to increase profits under its current CEO Luigi Lovaglio, who assumed the position in February this year.

It requires additional funding to axe 3,500 roles as part of the expensive early retirement plan and to increase capital, reported Reuters.

Around five years back, an €8.2bn bailout allowed the state to take a majority control of MPS.

The bank had to fight hard to obtain underwriters for its 7th cash offer in a period of 14 years.