Monte Paschi Said to Seek Offers for Managing Its Bad Debts

  • KKR, Blackstone, Cerberus, Apollo targeted as potential buyers
  • Italian bank is said to want non-binding offers by mid-August

Banca Monte dei Paschi di Siena SpA will start seeking offers as soon as next week for the platform that manages the Italian bank’s non-performing loans, targeting private-equity firms including KKR & Co. and Blackstone Group LP, two people with knowledge of the matter said.

The lender, which is being advised by Mediobanca SpA, is preparing to send sales documents known as teasers to companies including KKR, Blackstone, Apollo Global Management LLC, Cerberus Capital Management LP, Fortress Investment Group LLC and Lone Star, said the people, who asked to not be named because the process is private. Monte Paschi plans to collect non-binding offers by mid-August, and is aiming to reach an agreement by the end of the year, the people said.

“This is positive news and an additional step to address the bank’s bad-loan pile, one of its main problems,” said Niccolo Pini, who helps manage about 3 billion euros ($3.4 billion) at Banca Ifigest SpA. “Transferring the management of bad loans to specialized companies, which earn fees proportionate to a recovery, will improve the recovery rate with a great benefit for the bank’s accounts.”

Monte Paschi erased an earlier drop of as much as 2.9 percent and closed 0.3 percent higher at 59 euro cents in Milan trading. The shares are down 53 percent this year, outpacing the 20 percent decline by the 47-member Stoxx 600 Banks Index.

Monte Paschi plans to transfer the management of its 28-billion euro bad-loan portfolio to the buyer, with the price depending on the terms of contracts including duration and fees, according to the people. Chief Executive Officer Fabrizio Viola is seeking to clean up the lender’s balance sheet by reducing risky assets after tapping investors for cash twice in less than two years.

Viola has said he was seeking a deal with a firm that wants to enter the Italian market as a manager of distressed loans. Monte Paschi’s bad-loan portfolio would remain on the books of the bank.

Spokesmen at Monte Paschi, Cerberus and Blackstone declined to comment. Officials at Apollo, Fortress, KKR and Lone Star weren’t immediately available for a comment.

Private-equity firms have signaled their interest in acquiring servicing companies, which allow them to directly manage assets instead of paying additional fees to other firms. Last year, Fortress Investment Group paid 530 million euros to buy UniCredit SpA’s debt-collection unit and a portfolio of non-performing loans, people said at that time.

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