Italian fund plans vehicle to help banks manage bad loans
MILAN (Reuters) - Private equity fund Opera plans to set up an investment vehicle to manage some of the bad loans of Italian banks in an attempt squeeze more value out of them.
Bad debt has become the number one problem for Italian lenders after the country's longest recession since World War Two. They have found it difficult to shed soured loans as prices offered by specialised investors often fall short of the book value, experts involved in some transactions say.
Opera's planned vehicle will manage loans to struggling businesses, up to a maximum total value of 500 million euros (396.74 million pounds), the Italian fund's head Michele Russo told Reuters on Thursday. It will convert the debt into equity in those companies, and also inject money into the businesses to turn them around, he said.
Banks, who will hand over the bad loans - of 10-100 million euros each - in exchange for shares in the planned vehicle, will benefit if the ailing businesses are returned to health and increase in value.
Russo said institutional investors would be tapped to buy shares in the vehicle, allowing it to raise the money needed to turn around the indebted companies.
A handful of Italian cooperative banks would be interested in the vehicle, according to sources close to matter.
Lawyer Gianluca Leotta, who is advising on the project, said Opera was also open to big banks joining.
Italian banks' non-performing loans, or the problematic debt least likely to ever be repaid, rose 19.7 percent in September from a year earlier to reach 177 billion euros, according to the Bank of Italy.
(Reporting by Maria Pia Quaglia and Stefano Bernabei in Rome; Writing by Francesca Landini; Editing by Pravin Char)
