UniCredit sells risk on $1.2 billion of loans to U.S. fund

MILAN Tue Jan 21, 2014 1:02pm EST

Italy's largest bank UniCredit is pictured in downtown Milan September 12, 2013. REUTERS/Stefano Rellandini

Italy's largest bank UniCredit is pictured in downtown Milan September 12, 2013.

Credit: Reuters/Stefano Rellandini

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MILAN (Reuters) - UniCredit (CRDI.MI) has sold some of the risk on a 910 million euro ($1.2 billion) portfolio of Italian project finance loans, freeing up capital for new lending with a transaction that could open the way to other similar deals in Italy.

Italy's biggest bank by assets said on Tuesday it had sold junior and mezzanine notes, backed by loans to Italian companies, to two funds managed by Mariner Investment Group, a U.S. hedge fund.

Growing appetite from foreign investors for debt that banks want to offload, and the need for Italian banks to free up capital to lend to local companies at a time when the economy is starting to recover, could prompt more such transactions.

"We would be happy to look at taking more exposure in Italy," Andrew Hohns, Managing Director at Mariner Investment Group, told Reuters.

"We have discussions going on with a range of institutions, some of them are in Italy, and we hope these will evolve in a good way," he said, adding the fund would be pleased to do more deals with UniCredit.

A source close to UniCredit said the bank could do similar deals with Mariner Investment Group in the future.

"The transaction signals a strong interest of foreign investors for Italian assets," a UniCredit spokesman said.

Neither party would disclose the value of the notes UniCredit sold, which were backed by a 910 million euro portfolio made up of loans to energy companies based in Italy.

A health check for euro zone banks and pressure from the Bank of Italy have forced Italian banks to write down the value of problematic loans in the past months, attracting foreign buyers to some of these assets.

NEW INVESTMENT VEHICLE

The U.S. hedge fund said the UniCredit deal was the first one of a new investment business, Mariner Infrastructure Investment Management, it has just launched.

Through this vehicle, the hedge fund is channeling funds from institutional investors to buy debt in infrastructure, energy and transport sectors, Marine Investment Group said.

The U.S. fund has already raised around 450 million dollars for this new investment initiative.

Banks that need to offload risk to comply with tighter rules for regulatory capital are the targets for the new business, it said.

Italian banks cut lending to companies by 98 billion euros between November 2011 and November 2013, according to data published by the central bank this month, as lenders tried to keep a lid on surging bad loans in the euro zone's third-largest economy.

Both risky lending and non-performing loans are constraining the ability of banks to give fresh credit to companies and the Bank of Italy has urged lenders to start selling their bad debt to free up capital.

In December UniCredit reached an agreement with Cerberus European Investments LLC to sell a portfolio of non-performing loans with a gross value of around 950 million euros.

(Additional reporting by Danilo Masoni and Valentina Za; Editing by Pravin Char)

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