UniCredit Said to Be Selling $3.5 Billion Loans in Cleanup

(Bloomberg) -- UniCredit SpA is selling at least 3 billion euros ($3.5 billion) of non-performing loans in different deals, while extending a partnership to manage troubled corporate debt as part of its cleanup strategy, according to people with knowledge of the matter.

The Italian bank is reviewing final offers for 700 million euros of unsecured loans in a disposal project dubbed Narciso and plans to finalize the sale next month, said the people, who asked not to be identified because the matter is private. The lender is also seeking offers for two portfolios known as Torino and Milano, which jointly amount to about 1.8 billion euros, the people said.

The Milano package consists of about 800 million euros of secured debt from small- and medium-sized firms, while the Torino portfolio includes about 1 billion euros of mostly unsecured loans. Offers are due next month. The bank is also selling about 500 million euros of soured debt in small packages or single-name, large loans made to companies whose strength has since deteriorated, the people said.

A spokeswoman for UniCredit declined to comment.

Chief Executive Officer Jean Pierre Mustier has made the balance-sheet cleanup a pillar of his tenure. Earlier this year, the bank closed the biggest disposal of bad loans in Italian history, selling 17.7 billion euros worth to investors. UniCredit is targeting gross non-performing exposures of 37.9 billion euros at the end of 2019, down from 44.6 billion euros at the end of March.

“The step-up of disposals of bad loans goes in the direction set by Mustier,” said Nicola Maino, a fund manager at Carthesio SA, a Lugano-based investment firm which manages about 1 billion Swiss francs ($1 billion). “The bank’s decision to go ahead with disposals now shows Italy’s political uncertainty is having little impact on the bad-loan market. Returns are still very attractive for prospective buyers.”

UniCredit is widening the disposals to so-called UTP, or unlikely-to-pay loans, to take advantage of an economic rebound and transitional rules under the new IFRS 9 accounting standard that allow them to spread the impact of increased provisions over five years.

The lender is also seeking to expand its partnership with Aurora Recovery Capital, a venture that includes Pacific Investment Management Co., to restructure and potentially refinance as much as 3 billion euros of non-performing loans, mainly UTP, the people said. A spokesman for Aurora declined to comment.

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