Italy

Italy's two largest banks, UniCredit and Intesa Sanpaolo, are teaming up with U.S. private equity firm Kohlberg Kravis Roberts to pool some of their bad loans into a vehicle that will provide fresh capital for the struggling companies, the Financial Times reported. The preliminary agreement, which also involves restructuring adviser Alvarez & Marsal, will be announced on Tuesday, the paper said on its website on Monday. The announcement is likely to say the four companies have signed a memorandum of understanding but are still working out many details, FT said.

Monte dei Paschi di Siena, Italy’s third-largest bank, plans to offer investors as much as 5 billion euros, or $6.9 billion, in new stock as it fights to avoid nationalization and braces for stress tests of its balance sheet by European regulators, the lender announced on Friday, the International New York Times DealBook blog reported. The bank’s board approved the plan in an afternoon meeting, agreeing on €2 billion more than a previous management proposal that shareholders balked at in December.

The adviser of troubled Italian energy group Sorgenia will meet creditor banks on Thursday with a final deal over debt restructuring in sight, a source close to the matter said, Reuters reported. "The deal is within reach, there will be a meeting tomorrow," the source said on Wednesday. Sorgenia, controlled by holding company CIR has run up 1.9 billion euros of debt - 600 million euros of which must be cleared to keep it afloat in the short term. Sorgenia owes money to about 20 Italian and foreign banks. Its main creditor is bailed-out Italian lender Banca Monte dei Paschi di Siena.

The management of troubled Italian lender Banca Monte dei Paschi di Siena SpA is considering raising up to €5 billion in a share sale, instead of the €3 billion previously planned, people familiar with the matter said Monday, The Wall Street Journal reported. The decision will need to be first approved by a board of directors in a vote that is likely to take place next week, and then it will need to be submitted for approval to the bank's shareholders. A spokesman for Monte dei Paschi declined to comment.

Italian Prime Minister Matteo Renzi cut the government’s forecast for economic growth and renewed his promise to slash benefits for top civil servants, saying the working poor are shouldering too much of the pain, Bloomberg News reported. Gross domestic product will expand 0.8 percent this year, Renzi said late yesterday in a news conference in Rome after his cabinet approved his multi-year budget plan. That compares with the 1 percent growth projected in September by Renzi’s predecessor, Enrico Letta. Italy’s GDP contracted 1.9 percent last year, the second decline in a row.

Italy's banks will not require any state funds as a result of the European Central Bank's stress tests this year on euro zone banks, the head of Italy's banking association ABI has told a German newspaper, Reuters reported. The ECB is putting the euro zone's 128 largest banks through a painstaking review of their loan books before becoming their supervisor in November, in a bid to force them to come clean on hidden losses and restore investors' trust in the sector.

Famed Italian automotive styling house Bertone has confirmed it has entered court bankruptcy proceedings after mounting debts forced it to send staff home. “The problem is many debts and very high costs. At the moment everything is blocked,” a spokesperson told The Telegraph. “People haven’t been coming to work for a month and a half now.” The fate of the Turin-based company will be known by the end of April, according to the spokesperson. A court will either declare that the company will close for good or reveal the name of the most suitable buyer.

Italian Prime Minister Matteo Renzi unveiled plans to make €10 billion ($13.9 billion) in cuts to payroll taxes and a further €2.4 billion in business-tax cuts, his first effort to deliver on promises to overhaul Italy's sclerotic economy, The Wall Street Journal reported. Mr. Renzi also pledged on Wednesday to pay €68 billion in overdue bills by the state by the summer, a move that has helped lift the economy in other Southern European countries such as Spain. Mr. Renzi, however, didn't immediately provide details on how the arrears payments would be financed.

European Union authorities on Wednesday said Italy's economic woes require strict monitoring and "strong policy action," putting more pressure on Rome to cut its government budget deficit amid record unemployment, The Wall Street Journal reported. But officials at the European Commission, the EU's executive arm, declined to take a similar step for Germany because of its large current-account surplus, the broadest measure of a country's trade and financial flows with the rest of the world. The U.S.

Shareholders in Italy's Seat Pagine Gialle gave the go ahead on Tuesday for a plan aimed at relaunching the heavily indebted Italian yellow pages publisher, allowing creditors to take control of the struggling company, Reuters reported. Measures voted by shareholders include a near 20 million euro cash call reserved for creditors that will see current investors diluted to just 0.25 percent of capital. Royal Bank of Scotland and bondholders will forego debt of around 650 million euros ($893 million) and 837 million euros respectively to become the new owners of the company.