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UniCredit Nears Sale of $1.7 Billion Bad Debt to Italy Banks

Bloomberg logoBloomberg 7/2/2020 Sonia Sirletti

(Bloomberg) -- UniCredit SpA is close to selling bad loans with a face value of more than 1.5 billion euros ($1.7 billion), signaling that the pandemic hasn’t undermined a thriving market for Italian credit.

UniCredit is in advanced talks with Illimity Bank SpA and Guber Banca SpA to offload about 700 million euros of mostly unsecured non-performing corporate loans, according to people with knowledge of the matter. Separately, the lender is close to finalizing the sale of an 800 million-euro package of soured debt to Guber and Banca Ifis SpA, the people said, asking to not be named because the discussions are private.

Representatives for UniCredit, Illimity, Ifis, Guber declined to comment.

The transactions, respectively dubbed Lisbona project and Tokyo project, may be finalized by the end of the month, and are part of Milan-based UniCredit’s ongoing effort to clean up its balance sheet and reduce risk. Despite the affects of the pandemic on borrowers, the bank reduced its non-performing loan ratio to 4.9% as of March 31 from 5% at the end of December.

The deals will be closely watched by peers seeking signs that the NPL market is still alive as they brace for a new wave of customers defaulting on mortgages, business loans and other debt because of the coronavirus. Earlier on Thursday, UniCredit said it reached an agreement to sell 335 million euros of bad loans to Banca Ifis in a separate deal.

“These transactions highlight that the market hasn’t been killed off and that the biggest banks like UniCredit are ready to face the new situation post-lockdown,” said Massimo Famularo, head of Italian non-performing loans at advisory firm Distressed Technologies.

The deals would be the first sales out of about 8 billion euros of NPLs that UniCredit is offering in several bundles, according to one of the people. They include about 2.5 billion euros of bad loans split between packages Lisbona, Tokyo and New York; 3 billion euros of so-called unlikely-to-pay loans through the Dawn and Sandokan 2 initiatives and about 2.5 billion euros of leasing loans.

(Updates with analyst comment in sixth paragraph)

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