Italy's Bad-Loan Alchemy Aims to Turn Toxic Dross Into Gold
- Government plans to `wrap' securitized pools of soured loans
- Guarantee means Italy becomes buyers' credit counterparty
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Italy’s plan to use securitization to help relieve banks of their soured loans is an attempt to imbue securities backed by non-performing assets with some of the luster enjoyed by sovereign bonds, according to a senior official at the Treasury.
Italy plans to “wrap,” or guarantee, bonds issued out of vehicles set up to pool banks’ non-performing loans. The warranty, which will only be available for the investment-grade notes and for which the vehicle will pay market rates, will give bonds secured by banks’ duff loans a standing similar to that of state debt, Alessandro Rivera, the head of the Italian Treasury’s Banking, Finance and Legal Affairs unit, said in a telephone interview.