Banca Monte dei Paschi di Siena's €50bn EMTN programme has been assigned a B- senior non-preferred rating by Fitch, as the Italian lender's privatisation saga continues.
The Italian lender has not issued benchmark SNP debt to date. The bank declined to comment on whether it has plans to issue in the format.
The rating, announced on Wednesday, is one notch below BMPS's Issuer Default Rating of B, reflecting the risk of below-average recovery prospects.
"Below-average recovery prospects arise from the use of more senior debt to meet resolution buffer requirements and from the combined buffer of Additional Tier 1, Tier 2 and SNP debt being unlikely to exceed 10% of risk-weighted assets," said Fitch.
The agency added that the rating is assigned to the programme and not to notes issued under it, specifying that it is not assured notes issued under the programme will be assigned a rating, or that any rating of a specific issue would match that assigned to the programme.
The new rating is on Rating Watch Negative, as is the IDR, reflecting the bank's expectation that its capital will fall below requirements from March 2021.
"The RWN also reflects the risk of a downgrade if we consider the capital-strengthening actions taken by the bank to be insufficient and view its upcoming strategy to have high execution risks," said Fitch.
BMPS must report to the European Central Bank by the end of January how it plans to plug its capital shortfall, while the Italian government continues to try to find a buyer for the long-troubled state-owned lender.
BMPS is expected to grant access to confidential data to potential merger partners within days, formally starting the privatisation process, according to a Reuters report.
The Italian government has reportedly identified UniCredit as the ideal merger partner, but the latter is prioritising its search for a new chief executive after Jean Pierre Mustier announced his exit last year, according to reports.
At the same time, Italy faces political turmoil after former premier Matteo Renzi pulled his party out of government on Wednesday, stripping the ruling coalition of its parliamentary majority.