* Italy's top two banks to pool some restructured loans
* Banks clean up balance sheet ahead of EU stress tests
* Special vehicle could hold 2 bln euros of loans - source
By Francesca Landini
MILAN, April 22 Italy's top two banks UniCredit
and Intesa Sanpaolo have signed a deal with
U.S. private equity firm KKR to pool some of their
problematic loans, as the country's lenders seek new ways to
grapple with soured debts.
The two banks plan to set up a special vehicle to manage
some restructured loans they are both owed by the same
struggling businesses, hoping that combining the troubled debts
along with outside expertise and capital could either make those
debts more recoverable or easier to sell to third parties.
A source close to the matter said each lender would put 1
billion euros ($1.4 billion) worth of loans into the vehicle,
into which KKR would invest an undisclosed amount. Turnaround
specialist Alvarez & Marsal is also part of the memorandum of
understanding, whose details are still being worked out.
Bad loans have become the number one problem for Italian
lenders after the country's longest recession since World War
Two, which is just showing signs of ending. So-called
"sofferenze", or the non-performing loans least likely to ever
be repaid, totalled a record 162 billion euros in February,
according to banking association ABI.
Writedowns on bad loans and goodwill resulted in UniCredit
booking a record 14 billion euros loss last year, while Intesa
posted a loss of 4.55 billion, as Italian lenders aggressively
cleaned up their balance sheet in the run-up to a regulatory
"health check" of the balance sheets of banks in the euro zone.
The preliminary deal between UniCredit, Intesa, KKR and
Alvarez is a rare example of European banks joining forces with
private equity funds eager to buy assets from capital-starved
lenders and benefit from a recovery in Europe's weaker
One source said UniCredit and Intesa had no intention for
the time being of getting the loans off their balance sheets, as
they were confident they could get them repaid. However, pooling
the problematic loans should make it easier to sell them if
"The aim is to have the vehicle ready after the summer," the
source said. A second source said that if the project proved
successful, it could be extended to other Italian lenders.
The partnership was still being discussed and more details
would be negotiated as the deal progressed, the banks said in a
UniCredit, Alvarez & Marsal, KKR, Intesa Sanpaolo declined
to comment on financial details of the deal.
UniCredit had around 6 billion euros in restructured loans -
debts that have already been renegotiated - at the end of 2013,
while Intesa had 2.3 billion.
($1 = 0.7244 Euros)
(Additional reporting by Massimo Gaia in Milan and Steve Slater
in London; Editing by David Holmes)