Italy's Pop Vicenza investors approve emergency capital plan

By Andrea Mandala

GAMBELLARA, Italy (Reuters) - Shareholders in Italy's Banca Popolare di Vicenza begrudgingly approved a crucial fund-raising plan that includes a rights issue of up to 1.75 billion euro (1.3 billion pounds) to avert supervisors taking control of the troubled bank.

Popolare di Vicenza is one of several Italian banks under pressure from the European Central Bank (ECB) to take action to improve their capital positions.

It must raise the cash by May to comply with ECB demands that it meet minimum capital thresholds, having posted a 2.2 billion euro loss in 2014-2015 due to a balance-sheet clean-up.

In a letter before Saturday's shareholder meeting, which also backed a proposal to list the bank on the Milan bourse and turn it into a joint-stock company, the ECB had warned failure to approve the capital plan would lead to supervisory measures.

Popolare Vicenza is due to launch the cash call and market flotation next month. The timing could hardly be more challenging due to market worries about Italian banks and the 360 billion euros of bad loans on their books, which has knocked their shares.

"It's clear we are facing a very tough market but we must go ahead with the listing. I am sure it'll be a success," said CEO Francesco Iorio, adding that a roadshow in New York had gone well.

Regional peer Veneto Banca will also seek to raise 1 billion euros and float on the market at roughly the same time. Both share sales are fully underwritten - UniCredit will guarantee Popolare di Vicenza's, while Intesa Sanpaolo will buy any unsold shares in Veneto Banca's cash call.

The Veneto lenders are among 10 cooperative banks targeted by a government reform aimed at encouraging mergers by forcing them to convert to joint stock companies.

Shareholders at the Popolare di Vicenza meeting were mostly customers who were sold the unlisted stock at an inflated value.

"I have lost several hundred thousands of euros. My heart is crying for myself and my family, but I am voting yes," said shareholder Bruno Gonzato.

Investors opposing the joint-stock company transformation will get 6.3 euros a share for their stake - a tenth of the 62.5 euro price at which the bank last sold new shares two years ago.

Unlisted banks such as Popolare Vicenza traditionally sell their shares to customers and each year set a value for the stock. Last year Popolare di Vicenza cut the value of its shares to 48 euros from 62.5 euros, but 6.3 euros is now seen as the benchmark for the initial public offering.

The ECB uncovered 1.1 billion euros in loans Popolare Vicenza granted clients to help them buy its own shares. The bank is under investigation for allegedly manipulating the market and deceiving regulators.

Its core capital of 6.65 percent is well below the ECB's requirement of 10.25 percent. Last year the bank suffered a significant deposit outflow, although it has said the situation stabilised in the first few weeks of this year.

(Writing by Silvia Aloisi; Editing by Alexander Smith and Adrian Croft)