Italian bad loans draw hedge fund interest

Algebris Investments, a London-based asset manager, is seeking to raise €1bn for a second fund aimed at Italy’s non-performing loans as investors’ interest in what’s been the Achilles heel of the country’s banking sector intensifies.

The launch by Algebris, which has $6bn in assets under management, comes amid increased focus by foreign investors on the potential of Italy’s pile of €360bn of problem loans, of which €200bn are classed as gross NPLs.

UniCredit, Italy’s largest bank by assets and only globally significant bank, will on Tuesday announce the securitisation of its portfolio of €50bn of gross NPLs as part of a capital-boosting plan, say people informed of the plan.

Monte dei Paschi di Siena, Italy’s troubled third-largest lender, which is seeking to raise €5bn in the next week or face a taxpayer funded bailout, is also on track to hive off €28bn of gross NPLs as part of its restructuring.

In a statement, Algebris said its NPL Fund II will invest mainly in NPLs of Italian banks with a focus on loans secured by real estate located in northern and central Italy, a tranche of the market considered to have the most value.

It follows the first Algebris NPL fund which was launched in October 2014 and has so far invested €400m in 36 deals closed with 24 banks.

Chief executive Davide Serra said Algebris, which has its own team of servicers in Milan, said he was launching the new fund with an eye to “the acceleration” of a clean-up in Italian bank balance sheets in the light of demands by the ECB bank supervisor.

“If we assume a return to pre-crisis levels, the amount of NPLs that may be sold by Italian banks in the next three to five years is about €140bn, of which €65bn are secured,” Mr Serra said.


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