MILAN: Italy’s biggest retail bank Intesa Sanpaolo (ISP.MI) has clinched a deal with U.S. hedge fund Davidson Kempner over 10 billion euros ($11 billion) in problem loans, moving closer to a 2021 target of cutting soured debts to 6% of total lending.
In reporting a higher-than-expected net profit for the second quarter, Intesa said it would sell 3 billion euros in so-called ‘unlikely-to-pay’ (UTP) loans to Prelios, a loan recovery specialist owned by the New York-based fund.
The loans will be sold at book value, or two-thirds of their face value. Under the deal, Prelios will also take under 10-year management a further 6.7 billion euros in corporate UTP loans.
Intesa did not disclose the management fees, saying only they were in line with market terms and included a large variable component.
Recovering UTPs can be more complex and costly than liquidating defaulted loans, often entailing debt restructuring, turnaround plans and new investment to return businesses to health.
