ANALYSIS: Italian NPL market on track for record GACS and M&A volumes - Debtwire

ANALYSIS: Italian NPL market on track for record GACS and M&A volumes

01 May 2018 - 12:00 am

The Italian non-performing loan (NPL) market is on track for a record year in terms of securitisations and mergers and acquisitions of servicers and NPL management platforms, according to analysis of Debtwire and Mergermarket data.

The data will be presented at the Debtwire Italian Restructuring Forum on 9 May in Milan.

The Debtwire NPL Database is currently tracking EUR 38.3bn of deals expected to be covered by the Italian government’s securitisation scheme, GACS, up from EUR 20bn in 2017 and EUR 480m in 2016. This represents 67.9% of the EUR 56.4bn total volume of 18 ongoing NPL deals in Italy, according to Debtwire. Banca Monte dei Paschi di Siena’s EUR 25bn securitisation is the biggest f the eight planned GACS deals being monitored by Debtwire.

Keen to tackle bad loan books, investors have snapped up servicers and banks’ NPL managing platforms. Analysis of Debtwire and Mergermarket data shows that 2017 was a record year with nine transactions of servicers’ and banks’ NPL platforms, with a deal volume of EUR 680.7m. In 2018, there have been four deals for a disclosed volume of EUR 520m. FBS, Fire, and Working Capital Management are currently up for sale, according to Debtwire.

Intrum and Intesa SanPaolo have just announced a JV for Intesa’s platform managing EUR 40bn NPLs.


The GACS scheme is due to expire on 6 September. Without a Parliamentary majority to form a government since the Italian elections on 4 March, the future of the scheme is uncertain. This explains why banks are rushing to close their securitisations by the third quarter of 2018.

The GACS law, involving a state guarantee on seniors NPL notes, came into force on 16 February 2016. After a slow start and Banca Popolare di Bari’s EUR 480m securitisation in August 2016, the scheme got a boost in 2017 when it was used by CreVal, Carige and for Unicredit’s EUR 17.7bn Project FINO.

The banks’ ability to clearly define the portfolios and the role of servicers and rating agencies have made the processes more transparent, said Riccardo Serrini, chief executive of Prelios Credit Servicing. The banks have been able to sell portfolios at a higher price than in direct sales.

“In the case of similar portfolios, the prices for those with GACS have been up to 30% higher than the prices for those sold without GACS,” Serrini said.

GACS’s impact on the market has so far been mixed though. Investors including pension funds and insurance companies have been able to buy NPL securitised notes, Serrini pointed out. Yet, so far UniCredit is the only bank to sell the senior notes in the market. Banca Popolare di Bari, CreVal, and Carige have only sold mezzanine and juniors notes, for a total of EUR 128.8m out of three deals with total GBV of EUR 2.8bn.

“For the banks, it is more advantageous to retain the senior notes given the limited risk,” Serrini said.


Serrini said he hopes the GACS scheme will continue and include unlikely-to-pay loans (UTPs). Italian UTPs are becoming a more important feature of Italy’s bad loans market. A total of EUR 104bn is sitting on the banks’ books compared with EUR 190bn Italian NPLs, according to PwC. Debtwire is currently tracking four deals that include UTPs or performing loans totalling EUR 9.2bn.

UTP portfolios have to be handled differently from those of NPLs, said Domenico Torini, partner at KPMG.

“Experience in the specific fields and some restructuring skills are necessary,” said Torini. UTPs involve debts with companies still alive and the sector needs specialised players, Torini added.

Banca Monte dei Paschi is in the process of picking an advisor for a EUR 5bn UTP portfolio. The advisor will have to classify loans by markets and companies and ask investors to restructure them rather than opting for a big sale, as reported.

Yesterday (30 April) was the deadline for Carige’s EUR 1.4bn UTP Project Isabella, said a source close to and a source familiar with the situation. Investors were invited to bid on single names from a EUR 1bn tranche — consisting of about 15 large positions between EUR 30m and EUR 400m — and on an entire EUR 450m real estate-backed tranche, as reported.

Debtwire is also monitoring three unsecured NPL deals with a total GBV of EUR 9.2bn as well as three secured NPL deals totalling EUR 895m.

“It will take at least another year to work out all the current GACS deals,” said Torini. “Then, we will see large unsecured portfolios, UTPs, and single-name transactions.” This will require specialist skills for servicers and investors, he said.

Banks for Sale

Investors have responded to the changing NPL market by buying servicers and banks have started to externalise the management of their NPLs. UniCredit took the lead in 2015 when it sold UCCMB, later rebranded doBank, to Fortress Investment Group. Other banks followed suit, but did not sell to private equity.

“In other cases we have seen more industry players buying the banks’ platforms,” said Torini.

The biggest offload by a bank this year came in April when Intesa SanPaolo, Italy’s second-largest bank, and Swedish company Intrum agreed to form a joint venture to manage Intesa’s EUR 40bn bad loan book. The deal has involved the transfer to an SPV (49% controlled by Intesa) of a portfolio of EUR 10.8bn valued at 28.7%.

by Alessia Pirolo