Italy Said to Seek Help Reorganizing Firms Owing $11 Billion

(Bloomberg) -- The Italian state entity that took on soured debt from two failed Venetian banks is seeking partners to help restructure companies struggling to repay 9 billion euros ($11 billion) of loans, according to people with knowledge of the matter.

The collapse of Banca Popolare di Vicenza and Veneto Banca left tens of thousands of small businesses in the northern Veneto region without access to financing. They owe billions of euros in loans classed as unlikely to pay that were taken on by state-owned SGA SpA after the lenders imploded last year. Unlikely-to-pay debt, or UTP, refers to loans to borrowers that are still solvent but unlikely to meet their obligations in full.

SGA is seeking private-equity investors to help restructure, finance, and manage companies that owe UTP debt, the people said, asking not to be identified because the plan is private. Bain Capital Credit, DeA Capital, and Pillarstone Capital are among firms that showed preliminary interest, they said.

"Unlikely-to-pay loans are attracting more international investors as the Italian economy grows at a faster pace,” said Vanni Lucchelli, a partner at Compagnia Fiduciaria Lombarda SpA in Milan. “Also, the market for non-performing debt is now mature, and buyers are exploring investments in more complex types of loans.”

The two Venetian banks expanded corporate lending in the aftermath of the global financial crisis in 2008, bucking the trend of Italy’s largest lenders. Both collapsed in 2017 as the nation struggled to recover from a double-dip recession amid management scandals that wiped out the savings of about 200,000 shareholders.

Debt Transfer

The Italian government sold the healthiest parts of the banks to Intesa Sanpaolo SpA last year for a pittance and transferred about 18 billion euros of soured debt to SGA as part of the deal. While about half of those debts are considered non-performing loans owed by insolvent borrowers, the other half is held by operating companies whose debt is classified as UTP, the people said.

SGA plans to sign partnerships with private-equity firms on single big corporate loans or clusters of loans from similar companies, the people said.

Officials for SGA and DeA Capital declined to comment. No one from Pillarstone or Bain Credit was immediately available to comment.

Veneto Sviluppo

For smaller UTP loans, SGA is in talks with local financial-services firms, according to the people. Negotiations are ongoing with Veneto Sviluppo, a group controlled by local authorities in northeastern Italy, according to Fabrizio Spagna, the chairman of the organization.

“We are targeting medium-sized firms with at least 50 million euros of revenue that are based or have interests in Veneto,” Spagna said in an interview. "We are in advanced talks with SGA to help it finance and revamp firms whose loans are classified as UTP. A new meeting with SGA is scheduled this week, as we plan to start operations this summer.”

SGA is also working on handling the worst part of the debts, and has selected 12 servicers to manage about 3 billion euros of the smallest loans. The remaining 6 billion euros will be managed internally by staff from the two failed banks and SGA employees, the people said. To increase returns, SGA is investing in procedural, monitoring and management services, they said.

To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net, Luca Casiraghi in London at lcasiraghi@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Abigail Moses at amoses5@bloomberg.net, Keith Campbell, Vernon Wessels

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