Italian Non-Performing Loan Portfolios Attract At Least 7 Bidders -- Update
September 30 2015 - 7:12AM
Dow Jones News
By Giovanni Legorano
MILAN--Piles of bad loans accumulated over years of recession in
Italy are starting to find buyers.
At least seven investors have submitted offers for Italian bad
loan portfolios worth EUR4.2 billion ($4.7 billion) that are being
sold by General Electric Co. and three other firms, according to
people familiar with the matter.
It signals a distressed debt market that is gathering steam as
investors look for higher yielding, higher risk investments in a
low rate environment. And it comes after the Italian government
said recently that a broader economic recovery is taking hold.
GE is selling the portfolios together with Royal Bank of
Scotland PLC, Prelios SpA and Crédit Agricole SA. Offers are likely
to value them between EUR150 million and EUR200 million, one person
said.
Fortress Investment Group LLC, D.E. Shaw Group, Anacap Financial
partners LLP, Ares Management LLC, Deutsche Bank AG, Lone Star
Funds and CarVal Investors LLC, have bid for the four different
portfolios of soured loans, which include corporate and individual
loans, the people said.
The transaction would be the largest of this kind in Italy since
the financial crisis began. Local lenders relentlessly accumulated
piles of bad loans during Italy's longest recession since World War
II, but refrained from selling them to investors. This was because
increasingly stringent capital requirements, the protracted
economic downturn and a negative outlook for the real-estate market
led banks to worry about low levels of provisions translating into
large losses when bad loans were sold.
More recently, Italian lenders went through painful
recapitalizations that strengthened their ability to cover losses
on loans.
In addition, the Italian government introduced new laws that
give banks immediate tax breaks on losses on loans and make it
easier for creditors to repossess assets pledged as guarantees on
loans.
Investors now expect the combination of those factors to reduce
the gap between the price at which banks are willing to sell these
assets and the amount buyers will pay, paving the way for more
deals.
According to the Bank of Italy, bad loans totaled more than
EUR330 billion at the end of the first quarter, or 17% of total
lending. Data by Pricewaterhouse Coopers show that Italian banks
sold only EUR6.7 billion worth of bad loans last year, still up 40%
from 2012. So far this year, deals have already reached a total of
EUR9.6 billion.
"Market conditions for NPL [non-performing loans] deals in Italy
have been improving a lot in these last two years," said Giovanni
Bossi, chief executive officer of Banca Ifis SpA. "In wider terms
we are experiencing the best market in a decade."
GE co-owns three of the four portfolios with each of the other
firms, while RBS is the sole owner of the fourth one.
Some of the bidders may be asked to present binding offers as
early as this week, the people said.
GE's asset sale follows a decision by the conglomerate in April
to part ways with the bulk of its financing business, which long
accounted for half of the company's profit but whose risks have
rattled investors and weighed on its stock.
Away from the GE deal, Italian bank UniCredit said Monday that
it has agreed to sell about EUR1.2 billion worth of bad loans to
Anacap, bringing the nominal value of loans shed in the last two
years to over EUR10.5 billion.
Banca Monte dei Paschi di Siena, which in June sold EUR1.3
billion of distressed loans to Banca Ifis and Cerberus Capital
Management LP, is in talks with potential buyers of more bad loans
worth EUR1.8 billion. Bidders for the portfolio--which is almost
entirely made of unsecured credits--include Fortress, one of the
people said.
Other banks hoping to sell include Veneto Banca ScpA, which has
put up around EUR1 billion of loans, more than half of which are
secured.
"There are several options and the bank is studying market
conditions for various amounts," a Veneto Banca spokesman said.
RBS, Prelios, Monte dei Paschi, Deutsche Bank, Lone Star
declined to comment. GE, Crédit Agricole, Fortress, D.E. Shaw and
Anacap didn't reply to requests for comment. CarVal couldn't be
reached for comment.
Write to Giovanni Legorano at giovanni.legorano@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 30, 2015 06:57 ET (10:57 GMT)
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