Italy's Atlante Raises $4.8 Billion for Bank IPOs, Bad Loans

  • As much as 70% to be spent backing bank capital increases
  • Fund has resources to support Popolare Vicenza's IPO

Italy’s Atlante, the government-orchestrated banking fund, raised 4.25 billion euros ($4.9 billion) from 67 domestic and foreign institutions to help the country’s lenders build capital and reduce bad debt.

Atlante, which targets a 6 percent annual return from investments, will invest as much as 70 percent of its money in capital increases by Italian banks, Quaestio Capital Management, which runs the fund, said in a presentation on Friday. The fund will subscribe to as much as 75 percent of each bank issue and take bigger stakes if needed to complete the deals successfully.

“This is a restructuring fund that aims to create value for stakeholders -- we won’t be a long term-investor in banks,” Alessandro Penati, president of Quaestio, said in Milan. “Atlante can sign partnership agreements and make co-investments to accelerate returns on its investment.”

Government and bank officials this month agreed to set up Atlante to buy shares of troubled lenders seeking to raise capital and help them securitize and sell bad debt. UniCredit SpA and Intesa Sanpaolo SpA, Italy’s two biggest lenders, are the main investors, seeding the fund with 1 billion euros each.

The fund’s capital raising closed Thursday. Atlante could still grow in size, Penati said, if it gets approval of two-thirds of the current stakeholders. The chairman said some degree of conflict could arise between major shareholders over investment decisions, though “the investment committee’s opinion is non-binding, guaranteeing the fund’s independence.”

Share Purchases

One of Atlante’s tasks is acting as a backstop to the capital increases, which are required by the supervisory authority. In its first action, the fund will buy shares in a 1.5 billion- euro initial public offering of Banca Popolare di Vicenza SpA after agreeing to take on UniCredit’s obligation to purchase unsold stock.

“Atlante has the financial resources to fully support Popolare Vicenza’s capital increase,” said Penati. The fund will probably buy most of the shares as institutional investors showed little interest, according to terms of the deal seen by Bloomberg.

Atlante is also designed to help banks by buying some of their riskiest soured loans. Italian banks have an estimated 360 billion euros in bad loans, hindering lending and stifling profitability.

Under a plan presented Friday, Atlante will spend as much as 30 percent of its funds on junior and mezzanine tranches of securitized bad loans. After June 2017, Atlante can use funds not invested in banks to buy additional non-performing loans.

“Atlante will not buy banks’ bad loans at book value, because it has to invest in assets generating a positive return,” Penati said. Purchase prices will depend on the type of bad loans being securitized.

The fund’s firepower will increase should senior tranches account for a greater percentage of securitizations and should private investors be willing to buy mezzanine tranches, Penati said. Quaestio estimates senior tranches will be about 60 percent of total securitized bad loans, on average.

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