26 January, Il Sole 24 Ore
Sga is working on a model to help Italian banks getting rid of UPTs (unlikely-to-pay) while helping companies. According to Il Sole 24 Ore, the Treasury-owned company has been working at the project for quite some time. Sga is working at the implementation of a national platform for the management of UTPs. The project is still at the initial stage, as it hasn’t found the right set up. According to the rumours, the Prelios has been selected as the technical partner. The company will be working with other advisors on the dossiers, like Bain & Co concerning the industrial part and the firm RccLex for the legal part.
The object of the fund is to act as a vehicle for UTP portfolios (single holdings included) amounting to a couple of billion of euro. The project would concern medium-sized Italian banks, but it might be extended in the future also to Ubi, Banco Bpm, Bper and other medium financial institutions.
As already mentioned, the details of the project haven’t been defined yet. There’s the possibility, for instance, that the capital to acquire the portfolios might be provided by Sga itself. The advantage for Sga is the opportunity of accessing the market by issuing obligations almost at the same cost as the State ones. Sga might also involve other institutional investors in the securitisation of the riskiest tranches.
Since Sga doesn’t have a banking license, it will have to be supported by other fronting banks in order to carry out the traditional banking activities and manage the relations with the creditors. After all, UTPs concern still existing relationships. Unlikely NPLs (which are uncollectable), in the case of UTPs, the debtor is going through a difficult time, and the credit still has chances to return performing. Therefore, a certain managerial expertise is essential to collect the holdings through a restructuring process, with the objective of relaunching the business activity rather than adopting a speculative approach. UTPs generally come with a real estate guarantee. Therefore, it’s likely that there will be an intervention addressing all the companies with real estate developments, land with funded properties that are vacant, shopping centres and hotels to be re-positioned. The returns would be adequate but not excessive as the primary objective here is to relaunch the companies. Hence, the UTP purchases will have to be carried out at prices aligned with the market, also to avoid possible remarks from the EU.
Banks might deconsolidate a part of their UPT stocks, release capitals and acquire new assets. The total UTP stock amounts to about 86 billion gross, while Italian banks are covered for 30% of the gross value. For the ECB Surveillance, getting rid of UTPs has become a priority. As seen the recent Srep drafts sent to the Italian banks showed, there’s the tendency to no longer difference between bad loans and unlikely-to-pay, as they’re both included in the group of non-performing exposures. But, as UTPs are still collectable credits, they’re valued more than bad loans and have a lower coverage.
As a result, banks have the priority to minimise the impact of transfers on the accounts. Hence, it means reducing at the minimum the possible capital losses. The pressure of the Central Bank to increase the guarantees for non-performing loans in the next years will definitely favour transfers.
Source: Il Sole 24 Ore
Translator: Cristina Ambrosi