LONDON (Reuters) - A group of four international investment funds offered to inject 1.6 billion euros ($1.79 billion) of fresh capital into two ailing Italian banks in Veneto at the end of May, sources told Reuters, but their plan was not pursued by Rome along with more recent approaches to be part of a rescue deal.

FILE PHOTO: The Banca Popolare di Vicenza headquarters is seen in Vicenza, Italy, March 5, 2016. REUTERS/Stefano Rellandini/File Photo

Investment firms Sound Point Capital, Cerberus, Attestor and Varde submitted a rescue proposal for Banca Popolare di Vicenza and Veneto Banca on May 30, said the sources, who declined to be named as the matter is confidential.

They picked Deutsche Bank to work on the deal, partly due to its expertise with troubled Greek banks.

However the proposal, which was subject to due diligence, was not followed up on by Rome and recent attempts made by the funds to contact the Italian Treasury and restate their interest in the deal went unanswered.

The last conversation with the Treasury was 10 days ago, the sources said, but provided no clarity on whether the funds could play a role.

The government is expected to start liquidation proceedings for the two banks on Friday or Saturday, with retail bank Intesa Sanpaolo ISP.MI set to buy their good assets for 1 euro.

The state is likely to foot the bulk of the bill, using taxpayers’ money to take on the lenders’ soured debt.

The consortium led by U.S. hedge fund Sound Point Capital - who has former Goldman Sachs chairman Stephen Friedman as a limited partner - offered to pump in an overall 1.6 billion euros of capital.

Their proposal envisaged about 1.3 billion euros going into new tier one and tier two bonds that the banks would issue to them, and a further 300 million euros into their shares, the sources said.

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The offer was briefly discussed with the Italian Treasury in early June but the funds never got a formal response, the sources said, adding recent reports of a possible deal with Intesa came as a surprise.

In mid-June the funds told the Treasury they had the flexibility to work on an alternative proposal and team up with Italian lenders Intesa and UniCredit CRDI.MI, one of the sources said, in the event that the biggest Italian banks formed an investment vehicle and led the rescue of the Veneto banks.

But the Treasury ignored their interest, the source said.

The Bank of Italy, Deutsche Bank and Sound Point Capital declined to comment while the Italian Treasury, the Veneto Banks, Cerberus, Attestor and Varde were not immediately available for comment.

As part of the deal, the four funds were hoping to take a 15 percent stake in the two banks and control their governance, the sources said.

“Having control of the governance and management team was a key point,” one source said, adding this might have put off the Treasury.

The four funds worked closely with Popolare Vicenza boss Fabrizio Viola, a former CEO of Monte dei Paschi, who would have played a leading role had the plan succeeded, the sources said.

To proceed the four funds needed at least four weeks to carry out extensive due diligence on the banks’ books whereas Rome was looking for a much faster solution.

Italy has tried for weeks to prevent the two banks, which have a capital shortfall of 6.4 billion euros, from being wound down under European banking rules due to concerns senior bondholders and large depositors would be hit with heavy losses.

However, Rome failed to convince other, healthier lenders, to stump up funds to salvage them.

(This version of the story was refiled to add dropped word in paragraph one)