Italian Bank Prepares Government-Backed Bad Loan Sale

Banca Popolare di Bari SCpA is seeking to sell soured commercial and consumer loans with a face value of as much as 1 billion euros ($1.1 billion) in what may be the first disposal under Italy’s state-guarantee program, said two people with knowledge of the matter.

Popolare di Bari, a regional cooperative bank, is in talks with Fitch Ratings and Moody’s Investors Service to obtain a credit rating for about 500 million euros of the secured loans, said the people asking to not be identified because the plan is private. The bank appointed Prelios SpA as global servicer to review the portfolio and manage the recovery of the loans sold to investors, the people said. Officials at the bank, Fitch and Prelios declined to comment. Moody’s didn’t immediately reply to a request for comment.

Italy and the European Commission agreed in January on a plan to help banks offload bad debts through a securitization program benefiting from a government guarantee. Under the program, banks will be able to bundle bad loans into securities for sale, while buying state guarantees for the least-risky portions, provided they have an investment-grade credit rating.

Popolare di Bari, which plans to complete the sale of the first tranche by the end of May, may change the size of the sale or decide to not use the guarantee if it finds the conditions attached unsatisfactory, the people said.

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