LONDON/ATHENS (Reuters) - Italy’s biggest loan recovery firm doValue (DOVA.MI) has emerged as the strongest bidder for Eurobank’s (EURBr.AT) loan servicing unit, sources familiar with the matter told Reuters, a deal critical for the turnaround of Greece’s third largest lender.
Discussions are at an advanced stage as Eurobank wants to find a new owner for its Financial Planning Services (FPS) business by mid December, the sources said, speaking on condition of anonymity.
U.S. money manager PIMCO is also in the race, but its offer is seen as less competitive, they said, adding PIMCO previously failed to clinch a deal ahead of a September deadline.
“DoValue’s bid has an edge,” said a source familiar with Eurobank’s strategy.
Representatives at Eurobank, doValue and PIMCO declined to comment.
Eurobank is under pressure from European Central Bank (ECB) supervisors to cut its problem loans, which comprise more than a third of its total lending.
It is looking to sell about 80% of FPS for more than 300 million euros ($332 million), the sources said, with one adding doValue’s bid is about 15% higher than PIMCO’s.
Big portfolio sales have opened up a lucrative market for investors in risky assets.
Loan recovery units such as FPS, which carry with them long-term debt collection contracts, are particularly sought after, and banks have been selling them together with bundles of loans.
But any decision on FPS will need to take into account new legislation on non-performing loans that the Greek government is finalizing.
The bill, known as the Hercules asset protection scheme, aims to accelerate the clean up of banks’ finances in a sector burdened with 75 billion euros of soured loans.
The scheme will offer state guarantees for senior tranches of the secularizations on condition that banks manage to sell at least 51% of mezzanine and junior tranches to investors.
“It’s not a simple comparison of prices offered for FPS,” said the source familiar with Eurobank’s strategy.
“The bids are more complex and will hinge on the final version of the Hercules scheme.”
Eurobank initially snubbed a preliminary bid by Verona-based doValue, controlled by Softbank-backed Fortress Investment Group.
In July it selected PIMCO, its sixth-biggest investor, as its preferred bidder for FPS, giving the U.S. money manager three months to carry out due diligence and reach an accord.
But the deadline passed without a deal, forcing Eurobank to resume talks with doValue.
The Italian firm has existing operations in Greece and has made international expansion across Southern Europe a key focus.
Last year, it clinched a deal with Eurobank and three other lenders to manage 1.8 billion euros in soured corporate loans and then swooped on Spanish bad-loan manager Altamira.
($1 = 0.9024 euros)
Reporting by Pamela Barbaglia in London and George Georgiopoulos in Athens; Additional reporting by Valentina Za in Milan; Editing by Mark Potter