Banca Monte dei Paschi di Siena SpA's proposed securitization of more than €27 billion in nonperforming loans — which is a crucial part of its capital-raising plan — is in jeopardy because Quaestio Capital Management, which manages Italian rescue fund Atlante, could pull out of its expected €1.53 billion investment in a junior mezzanine tranche of the NPLs.

Quaestio "expressed strong reservations" over the terms of a bridge loan Monte dei Paschi accepted as part of its attempt to off-load NPLs. If the concerns Quaestio raised in a Dec. 17 letter cannot be resolved, the capital increase "would not be able to be completed" in line with the terms set out by the European Central Bank, the lender said Dec. 19.

Monte dei Paschi has to complete its recapitalization Dec. 31 after the ECB rejected its request for more time.

The CEO of one of Atlante's main contributors, Intesa Sanpaolo SpA's Carlo Messina, said he was in favor of the fund's investment and expected it to make a decision by Dec. 20, Reuters reported Dec. 19.

Monte dei Paschi's share price was down 8.98% to €19.00 at just after 4 p.m. in Milan on Dec. 19.

Last week, the bank reopened its debt swap offer, which runs from Dec. 16 to Dec. 21, extending it to retail investors after receiving approval from Italian market regulator Consob.