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Report: Italy rescue plan for Monte dei Paschi to involve mandatory debt swap

The Italian government's plan to rescue Banca Monte dei Paschi di Siena SpA, if needed, would include a forced debt-to-equity conversion of €4.1 billion of subordinated bonds, Reuters reported Dec. 16, citing "a source familiar with the matter."

Italy's troubled lender reopened its offer to convert certain subordinated bonds into equity from Dec. 16 to Dec. 21 and extended the offer to retail investors after receiving approval from Italian market regulator Consob.

The source told Reuters that if the voluntary swap offer and a share issue fail to raise €5 billion, the government would inject 900 million, while the remaining amount would come from a mandatory swap. Italy is reportedly still in discussions with the European Commission over ways to compensate retail bondholders for losses incurred from the forced conversion.