Sga working on a project concerning UTPs

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

Spaxs Illimity entered an agreement concerning factoring with Credimi

24 October, Yahoo Finance

Enrico Maria Fagioli Marzocchi, Illimity SME manager, commented: “We’re delighted to work with such an innovative fintech company like Credimi. Thanks to this agreement, we’ll start already operating in the factoring segment, which was planned for the first part of 2019, through the use of a state-of-the-art digital platform”.

Ignazio Rocco di Torrepadula, Credimi founder and Ceo, stated: “We’re going to close the second year of business of Credimi. It has been an extremely positive year for us, having tripled the volumes. Italian enterprises are one of the fastest ones in Europe in adopting new models, opening to new solutions and players. For this reason, we’re very happy to start the collaboration with Illimity, an innovative bank with an exciting vision, sharing with us the objective to enhance the quality and the accessibility to the financial instruments for the growth of businesses”.

Credimi is a factoring platform dedicated to European enterprises. It has a unique business model, given by the ability to assess the credit risk through a proprietary technology, in a nearly automatic way and at very low costs.

Illimity is a new bank, entirely digital, specialised in credit services to SMEs and led by Corrado Passera. The bank will be renamed Illimity after the merger of Spaxs and its subsidiary Banca Interprovinciale. Illimity operates in some specific segments which provide high yields and are little covered by the traditional operators. It provides credit to enterprises with a high potential but with a not ideal financial structure and/or with a low or no rating, including the SME and unlikely to pay segments. The bank acquires and manages through its platform corporate NPLs, both secured and unsecured. Starting from 2019, it will also offer direct e-banking services for retail and corporate customers.

Source: Yahoo Finance

Translator: Cristina Ambrosi

SGA focusing on UTPs in the new business plan up to 2023 and searching for new management mandates

19 October, Bebeez

SGA (Società Gestione Attività), a company owned by the Ministry of Economy and Finance, manages bad loans amounting to approximately 20 billion originated from the former Banca Popolare di Vicenza and Veneto Banca, along with 7 billion euro of unlikely-to-pay and past due credits. The company approved yesterday the guidelines for the new five-year business plan 2019-2023 which is based on three pillars:

diversified management between bad loans, unlikely to pay and past due credits: namely the so-called “gone concern” credits (to be collected) and the “going concern” credits (requiring a proactive management as they can return being regular credits), involving internal and external specialised professionals in order to optimise the collected amounts;

a proactive approach on the going concern holdings with the possibility to issue new funding to recover or preserve the company’s operations. It’s not by chance that SGA has launched the issuance of bonds for one billion euro in the past few months to obtain new capitals;

specialised professionals and innovative technologies for a business modal based on organisation, efficiency, flexibility and scalability.

Concerning the going concern credits, currently amounting to 7 billion, SGA stressed how these holdings require a proactive management focusing on the debtor, in order to recover and preserve the continuity of business and to normalise the financial position of the client, company or private. The objective is to maximise the value of the collection activities. For this purpose, SGA may issue new funding to favour the operational continuity of companies and the relaunch starting already from the reorganisation phase.

For what concerns the gone concern holdings, amounting to 12 billion, the approach must follow a strict procedure to maximise the value of the underlying guarantees, whenever present, and to optimise the judicial and extra-judicial collections. To achieve that, SGA is collaborating with the main players of the sector to use the economies of scale to achieve a standardised management of small NPE portfolios, maximising the collection performance, depending on the credit type, and optimising costs.

SGA, whose president and Ceo are respectively Alessandro Rivera, Treasury General Director, and Marina Natale, won’t just limit to manage its portfolio. As the memo disclosed yesterday reads, “SGA is intending to seek new opportunities on the market to achieve an adequate critical mass, leveraging the scalability of its business model. The objective is to maximise the economies of scale and to manage the collections efficiently and sustainably, obtaining new management mandates, especially in the going concern segment”.

Concerning the future SGA operations, the memo continues: “The plan for the next five years is based on a business model aimed at limiting costs and achieving an Ebitda margin equal to 35%, as well as a capitalisation with a Cet1 equal to 15%, which is an essential element to pursue new strategies and the expand our supporting activity to SMEs”.

Source: Bebeez

Translator: Cristina Ambrosi

Carige: obligations by the end of the year, NPL sale now

12 October, Il Sole 24 Ore

The agreement with Bain Capital Credit concerning the transfer of UTPs for 400 million has been formalised. Meanwhile, the procedures for the securitisation with Gacs (the state guarantee) concerning NPL for approximately 900 million have started. This operation too is scheduled for the end of the year. That’s what the Carige members meeting decided, the first after the nomination of Fabio Innocenzi as Ceo and Pietro Modiano as president. The Board gathered yesterday just after the downgrade of the bank by Fitch from B- to CCC+, based on the “real possibility” of a default of the bank from Genoa. As a result, the shares lost up to 10% on the Stock Exchange and closed with -6.12%, setting at 0.0046 euro.

Concerning Fitch, the Board stressed how the rating is based on the figures dated before the commitment taken by the majority shareholder Malacalza to support the bank after the last meeting. Moreover, the Board explains that the resolutions risk can be determined only in the case the capital strength requirements are not accomplished. The indicator of such requirements is the phased-in Cet1 ratio, which was 11.9% on 30th June: above the level required by the ECB (9.625%) and the threshold recommended by the Surveillance Authority to Carige (11.175%).

Concerning the Npe strategy, the Board gave the green light to the Ceo to proceed with the formalisation of the agreement with Bain to sell the UTP for a gross book value of 400 million. The operation will bring the Npe stock below the target of 4.6 billion agreed with the ECB. As already mentioned, the preliminary activities for the securitisation with Gacs will start by the end of the year.

Moreover, the bank might evaluate the various modalities of operational turnaround, and it will assess and identify a potential investment bank for possible mergers in the next meeting.

Concerning obligations, the deadline for the Capital conservation plan has been confirmed for 30th November 2018, as no postponement was requested to the ECB. The Board of Directors assigned the Ceo for the development of an operational plan by the end of the year to grant compliance with the Overall capita requirements, regardless of the current market conditions. For this purpose, the ideal conditions to fill the gap detected by the ECB are currently under study, along with the guarantees needed for the execution of the plan. The Board will decide in this regard by the end of the month.

The transfer of 80.1% of Creditis to Chenavari has also been discussed, and the negotiations are going on.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

Mps is selling its assets. Divestitures for over 5 billion

06 October, Il Sole 24 Ore

Monte dei Paschi is currently carrying out some significant operations to complete all the planned transfers within the year according to the de-risking process the state-owned bank is undergoing.

In the next weeks, the bank will put for sale its real estate portfolio. Its value is assessed around 500 million. The advisor Duff & Phelps Reas will launch the procedure soon by sending the documents to the potential investors (for large part international investment funds). The portfolio includes the historical buildings in Via del Corso in Rome, Via Santa Margherita in Milan, as well as properties in Siena and Padua, formerly owned by Antonveneta. A small portion of the portfolio is represented by closed down bank branches.

The focus is, however, on the NPL and UTP portfolio. The advisor Pwc is expecting the non-binding offers by 12th October concerning the 2.4 billion NPL portfolio, also called project Merlino. The portfolio is divided into four parts, including also the consumer credit division Consum.it. Banca Ifis, Hoist, Cerberus, Mb Credit Solutions and Kruk are among the candidates.

Mps has also launched the Morgana project (with Kpmg as the advisor) concerning UTPs for 1.1 billion. The non-binding offers came last week. The portfolio includes several leasing holdings backed by real estate for about 700 million euro. Among the competitors, there are Bain Capital Credit and Cerberus.

Moreover, Mps is also finalising the Alpha operation concerning UTP for approximately 420 million. The project regards about 30 holdings, for the large part related to real estate, including those of the Rome developers Pulcini and the Una Hotels owned by Fusi. The operation is at the final stage. The offers came from Bain Capital Credit, Cerberus, Fortress and the team composed of Aurora Recovery Capital and the American investor Farallon. In addition to these operations, the bank guided by Morelli is also selling several single name impaired loans, namely holdings towards a single debtor.

The returns from the auction that will be launched on the IT platform are assessed around hundreds of millions. The advisor Pwc is awaiting the offer from Cedacri and of some other strategic groups.

Finally, Mps entered the agreement with the company owned by the funds managed by Wargus Pincus concerning the sale of Banca Monte Paschi Belgium. The bank’s subsidiary, assisted by Rothschild, has total assets for 1.5 billion, loans for 0.8 billion, a direct collection for one billion and equity for 110 million as per last December. The transfer is compliant with the commitments agreed with the European Commission regarding the 2017/2021 reorganisation plan. The impact on the Cet1 is not significant, and it has already been included in the reorganisation plan’s forecast. The next step will be selling the French assets.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

Mps is ready to complete the Alpha2 to sell UTPs for 400 million. Farallon-Aurora among the candidates

29 September, Il Sole 24 Ore

The Mps group, currently controlled by the Government, is pursuing its clean-up process of impaired credits launching two auctions (Merlino and Morgana). The Merlino operation is for the transfer of an NPL (secured as well as unsecured) portfolio for an approximate value of 2.5 billion supported by PwC as the advisor. In the meanwhile, the bank has also launched the Morgana project (with Kpmg as the advisor) concerning bad loans for 1.1 billion.

Moreover, the bank is allegedly working also on another operation named Alpha 2 concerning UTPs for about 420 million and approximately 30 holdings in real estate assets. The project is at the final stage, having received the offers in the last few days. Among the candidates, there are Bain Capital Credit, Cerberus and the team formed by Aurora Recovery Capital and the American investor Farallon.

Also other banks are working on their impaired loans. Intesa Sanpaolo is currently carrying two auctions on two NPL portfolios, both for nominal values around 250-300 million. The operations are called Levante, focusing on corporate and real estate holdings, and Luce focused on the photovoltaic industry.

Finally, there is the Ace operation of Banco Bpm, currently the biggest portfolio on the market. The deadline for the binding offers is set for mid-November, and the state guarantee has been requested for a part of the portfolio. The portion destined to Gacs is comprised between 3.5 and 9.5 billion, including a portfolio of leasing credits.

Suorce: Il Sole 24 Ore

Translator: Cristina Ambrosi

Bim selling an NPL portfolio 601.1 million worth for 147.7 million

19 September, Reuters

The Board of Directors of Banca Intermobiliare approved the transfer and the securitisation of a bad loan portfolio for a gross nominal value of 601.1 million.

The operation implies the sale of the bad loans to the special purpose company Nuova Frontiera and the consequent securitisation with the issuance and underwriting of a senior and a junior tranche, as the memo reads.

Attestor Value Master Fund will underwrite both tranches for a total of 95%. The fund is connected to Trinity, Bim majority shareholder. Bim will underwrite the remaining 5%, for a market value of approximately 5.8 million.

The portfolio is composed of non-performing loans for 482.5 million, unlikely-to-pay for 116.5 million and credits returned being performing for 2.1 million.

The transfer price is set at 147.7 million. The operation will reduce the group’s Rwa by approximately 210 million (19%).

Source: Reuters

Translator: Cristina Ambrosi

 

Illimity: two NPL transactions in this month, the Banco Bpm operation is unlikely to conclude this year

07 September, Reuters

It’s unlikely that the transfer of the management platform and the NPL portfolio by Banco Bpm will be completed by this year, while the binding offers are expected between the end of October and the beginning of November.

Such was the comment of Corrado Passera, Spaxs Ceo, during the Ambrosetti forum in Cernobbio. As of 20th September, Spaxs will become Illimity, a business combination with Banca Interprovinciale and will also be working with non-performing loans and unlikely-to-pay.

“The binding offers are expected by the end of October and the beginning of November. We’re taking part with Fortress and doBank. It’s unlike the operation will conclude by the end of the year”, said Passera about the Banco Bpm operation.

One month ago, Passera stated that Spaxs is not interested in Banco Bpm management platform, which might be for sale, and that the offer from its team concerns rather the servicing platform of the bank guided by Giuseppe Castagna.

The manager also said that Illimity has already finalised two NPL operations for a gross amount of some hundreds of million euro and a net amount of some tens of million euro which “will be booked this month”.

He also added: “there are also UTP operations in the pipeline”.

Source: Reuters

Translator: Cristina Ambrosi

NPL: Mps restarts with the Merlino portfolio worth 2.5 billion

05 Sepetember, Soldi Online

Il Sole 24 Ore offers an update on the Italian NPL market which seems to get ready for a busy autumn. In the next months, some operations which were launched during the summer will go live.

Monte dei Paschi di Siena has resumed its activities. According to Il Sole 24 Ore, the bank has sent a teaser regarding the so-called Merlino project concerning the “transfer of approximately 2.5 billion of unsecured non-performing loans”.

Besides, also the operations started by Banco Bpm has come to a crucial phase, according to the financial newspaper. “The amount of the bad loan portfolio might vary, depending on whether the bank decides to sell 3.5 billion or up to 8-9 billion, platform included”.

Finally, the UTP (unlikely to pay) market is also very dynamic.

Source: Soldi Online

Translator: Cristina Ambrosi

Challenger banks will manage the UTPs of Italian banks, PwC says

08 August, Bebeez

As PwC already anticipated last month, at the end of 2017 in the accounts of the Italian banks, there were UTP for about 94 billion euro, bad loans for 165 billion and past-due credits for over 5 billion. Therefore, the total impaired loans amounted to 264 billion euro, having decreased from the 324 billion in 2016 (NPL for 200 billion, UTP for 117 billion and past-due for 7 billion). This debt reduction trend is destined to continue, according to the PwC analysts, during the presentation of the last report on the Italian debt market.

Banks have to deal with impaired loans other than NPL also due to the introduction of the new IFRS 9 accounting rules replacing the IAS 39 concerning the registration of financial instrument. The new regulation went live on 1st January 2018 and required banks to register the expected losses on loans as realisable losses. The new regulation will affect significantly the future financial statements already from this year, due to the adoption of the principles of expected loss (the registration of the expected losses and not of the already occurred losses) and of forward looking (as a result, banks will have to assess and measure the chances of default of the loans issued during the whole duration of the contract).

Banks’ strategies will be increasingly impacted by the requirements from the national and international regulating authorities. In Italy, the ECB guidelines will also extend to the less significant banks (with lesser NPE quotas). The calendar provisioning included in the ECB addendum will considerably accelerate the provisioning for bad loans originated starting from 2018.

In this regard, PwC stressed the importance of the business model known as “challenger bank”. Such operators will be able to provide integrated services concerning specialty finance and servicing, offering comprehensive solutions for the management of bad loans of the Italian banks, including the servicing of unlikely to pay.

An example of a bank pursuing such a model is Guber Banca. The servicer, a subsidiary of the fund Varde, got the banking license to become a digital bank operating mainly in credit and SME services, with a specialisation in NPL and UTP management, also in partnership with institutional investors.

The business model adopted by Guber is the same as Spaxs, the Spac of Corrado Passera and Andrea Clamer. However, while Guber became a bank after having obtained the banking license from the ECB based on a new business plan and a proven track record concerning bad loans collection, Spaxs announced the business combination with Banca Interprovinciale, namely an entity already holding a banking license. The Spac of Fabrizio Viola is expected the follow the same path. Fabrizio Viola was the Ceo of Popolare di Vicenza and Mps, and he’s currently a senior advisor for Boston Consulting regarding financial institutions. His company aims at raising 200 million euro to invest in a small bank to turn into a challenger bank. Another former banker, Roberto Nicastro, might do the same thing with Rnk srl. The company might acquire shares in fintech companies and startups to whom it will provide consultancy services and strategic plans.

Fitch shares the same considerations of PwC on challenger banks and UTP. The rating company, in fact, has recently stressed how fintech has entered the Italian market of non-performing loans. According to Fitch, the complexity of the analysis of unlikely to pay will bring banks to increasingly require the services of special servicers skilled in the use of artificial intelligence and machine learning technologies and able at the same time to form strategic partnerships with solid financial companies.

Source: Bebeez

Translator: Cristina Ambrosi