29 November, Milano Finanza
For Mps, the timing is perfect, with the new Board of Directors headed by Alessandro Falciai and the start of the clean-up process of assets. By mid-December, in fact, the bank led by Marco Morelli should make the first step of the operation agreed with the ECB: the transfer of the portfolio for 26 billion gross from the bank to the special purpose vehicle that will take care of the securitisation. Frankfurt asked Mps to get completely rid of the bad loans accrued up to 31st December 2016, an operation that will be completed by June of next year. After the stock transfer, the vehicle will issue the notes in the traditional three tranches according to seniority (senior, mezzanine, and junior). Only the mezzanine tranche for over one billion, however, will be transferred to an investor, namely Atlante 2, while the bank will underwrite the other two tranches for a couple months.
In detail, the fund managed by Quaestio sgr will get 95% of the mezzanine tranche, while the remainder will stay with Mps pursuant to the obligation of retention as per the European regulation on securitisations. In the meanwhile, the work to obtain the State guarantee (Gacs) goes on. Already in October, Mps appointed Cerved and doBank as servicers. Once defined the loan data tape, namely the structured archive of the portfolio, in these past few weeks the servicers have been working on the business plan, basically the recovery plan. The completion of the document is expected by the beginning of 2018, considering the dimensions of the portfolio, one of the biggest ever put on the market. It’s true, however, that the experts of doBank know already a good part of the positions since last year Italfondiario made the first assessment on the Mps portfolio. A preview of the business plan will be sent by the end of the year to the rating agencies, even though the final exam will be in 2018. The objective of the bank is to obtain the State guarantee by March-April in order to issue on the market the senior tranche according to the scheduled times. In detail, the public guarantee will be on the A1 senior notes, for a total amount of 3.25 billion, that will be placed together with the A2 notes, while Atlante 2 will get 95% of the junior notes for 686 million with the consequent divestiture of the portfolio. The leverage effect of the senior notes will allow Mps to close the operation with a price higher than the market average, set around 21% more of the initial value. Moreover, an earn-out in favour of Mps equal to 50% of the extra yield is expected, in the case the profit obtained on the junior notes will be higher than 12% yearly. For what concerns the price, the discount is higher than that of the recent operation through Gacs, but it’s not possible to make comparison considered the dimensions. For instance, Creval has securitised a stock of only 1.4 billion, while the operation announced last summer by Carige amounts to 938.3 million.
Particular attention will go the accounting effects of the operations. One of the preliminary conditions of ECB is the exemption on the loss given default models, namely the mechanism that penalises assets triggered by big transfers of bad loans. The exemption should have been negotiated, but it’s certainly relieving that the European Parliament is working on a measure on this matter. The draft involves that a bank could exclude the big transfers from the loss given default. In this case, the bank is to notify the competent authority of the amount, composition and transfer times. The authority will have then a maximum of five days since the notification to oppose to the exemption.
Certainly, the Mps securitisation will be biggest ever put on the market. In these days, in the meantime, a second operation has started, even if of smaller dimensions. It concerns the operation with State guarantee that Unicredit has started on the Fino portfolio, transferred in the first part of the year to Fortress and Pimco.
Source: Milano Finanza
Translator: Cristina Ambrosi