Prelios SpA, the Italian asset manager studying a merger of two units with those of Fortress Investment Group LLC, said it expects Italian banks to sell as much as 50 billion euros ($69 billion) of bad loans in the next two-to-three years.
Italian banks are sitting on 160 billion euros of non-performing loans, a figure that will swell to 200 billion euros in the next two years as Italy emerges from recession, according to Riccardo Serrini, chief executive officer of Prelios Credit Servicing SpA, a unit of Milan-based Prelios.
“We’re currently assisting investors bidding for 10.9 billion euros of NPLs,” Serrini said in an interview in his office in Milan. “Ninety-five percent of investors are from the U.S. and about 70 percent of the loans are secured by real estate.”
U.S. investors, including some without a presence in Italy, are making up for the shortfall of Italian funds that can absorb the planned disposals, Serrini said. Italian banks, which have so far resisted distressed-debt sales, are now accelerating plans to shed bad debt, which has reached record levels. They are considering pooling bad loans into separate units, or bad banks, in an attempt to free capital and increase lending capacity, as well as selling loans.
Prelios is jointly bidding with Fortress for UniCredit SpA’s bad loan management unit and they also offered to buy a majority stake of Banco Popolare SC’s bad bank called Release, Serrini said. The UniCredit and Banco Popolare businesses are complementary, he said, declining to comment on the value of the bids and whether Prelios would merge its NPL unit with UniCredit’s.
UniCredit is disposing of non-performing loans and isolating riskier debt. Italy’s biggest bank is transferring the risk on 910 million euros of subordinated debt to hedge fund Mariner Investment Group LLC, the lender said in January, and in December reached an agreement to sell a 950 million-euro loan book to Cerberus European Investments LCC.
Lone Star Funds and its partners are the biggest buyers of real estate loans in Europe so far this year, followed by Cerberus, Cushman & Wakefield Inc. said in a report today. European property-loan sales will rise 65 percent to a record 50 billion euros this year, the broker said.
New York-based Fortress, which managed about $61.8 billion at the end of December, and Prelios are studying the integration of their respective asset management and bad loan servicing units in the country, the company said on April 9.
Fortress’s Italfondiario SpA, the country’s largest NPL-management company with 36.1 billion euros under management, would combine operations with Prelios Credit Servicing, which oversees more than 8 billion euros of loans.
Italian banks led by UniCredit and Intesa Sanpaolo SpA own about 23 percent of Prelios, according to securities watchdog Consob’s website.