A behind-the-scenes tussle for control over a 7.5 billion euro ($10 billion) share sale by Italy's Unicredit has shown how increasingly tense market conditions are driving a wedge between investment banks.
When the opportunity to be involved in a big deal comes along, banks are usually quick to pile in, with fees, league table credit and client relationships to play for, as well as all-important kudos.
But the risk in taking on any transaction in such uncertain markets, let alone underwriting the shares of an Italian bank at a time when Italy's economy is being sucked ever deeper into the euro zone debt crisis, has brought strains to the fore.
U.S. heavyweights Goldman Sachs, Morgan Stanley and J.P. Morgan considered the risk involved in Unicredit's offering too great for the potential reward on offer, according to a report by IFR, a Thomson Reuters publication.
The 14-strong syndicate of banks appointed will underwrite between 700 million and 850 million euros worth of shares each and will receive fees between 2 and 2.5 percent, said a person close to Unicredit who attended the meeting with the banks.
That source said that when Goldman Sachs was declined a controlling role it then linked up with Morgan Stanley and J.P. Morgan to present themselves as alternative global co-ordinators of the share sale and requested a vote.
When that vote failed, the three U.S. banks walked away. All three later tried to reopen negotiations but only J.P. Morgan was successful in securing an underwriting position, the source said.
Morgan Stanley, Goldman Sachs and J.P. Morgan declined to comment.
Long-time advisor Bank of America Merrill Lynch (BoAML) was appointed as global coordinator alongside Mediobanca , in which Unicredit owns an 8.7 percent stake, and Unicredit itself.
BNP Paribas, Credit Suisse, Deutsche Bank, HSBC, Intesa Sanpaolo, JP Morgan, Societe Generale and UBS as joint bookrunners have a lesser role, while ING, RBC, RBS and Santander are co-bookrunners.
As the most senior role in a syndicate, global coordinators have the greatest say in running of the offering -- including, crucially, if and when to push ahead with it.
But having Unicredit and Mediobanca in this position made the U.S. banks wary about how much say they would have, according to other sources close to the negotiations.
One of those sources said the U.S. banks were uncomfortable about relying on risk assessments by banks that were very close to Unicredit.
The three banks were also concerned about BoAML's long-standing ties with Unicredit through Italian lead banker Andrea Orcel, the sources added.
The U.S. banks wanted to increase the financial protection in case the transaction didn't go through, the first source, close to Unicredit, said.
Shares in Unicredit, which holds 40 billion euros of Italian government bonds, have lost half their value this year, leaving its fundraising worth around 50 percent of its market value, and making it painfully dilutive for investors.
A rights issue by fellow Italian bank Banca Popolare di Milano last week fell 146 million euros short of its 800 million target, with investors taking up only 81.7 percent of the shares on offer.
At the last minute they got hung up on a couple of legalistic issues and thought that given the situation is so uncertain they could get some concessions from Unicredit by playing hardball, said a separate source close to the deal .
Such wrangling is not uncommon when companies are under pressure to raise capital.
When Santander launched a 7.2 billion euro rights issue in 2008, at least one bank walked away at the last minute after baulking at the risk of underwriting the deal.
And when Swiss insurer Zurich Financial Services was under pressure to raise capital in 2002, one American bank threatened to pull out of the loss-making insurer's syndicate and tell the press the deal was too risky, in order to impose its conditions, the first source close to Unicredit said.
($1 = 0.7506 euros)
(Additional reporting by Douwe Miedema in London and Silvia Aloisi in Milan; Editing by Sophie Walker)