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UniCredit closes $20 billion bad loan sale with Fortress, Pimco

UniCredit led clean-up efforts in Italian banks, which have been left with bad loans after recession

Reuters  |  MILAN 

Illustration: Ajay Mohanty
Illustration: Ajay Mohanty

Italian bank has signed a final agreement with US funds and on the sale of worth 17.7 billion euros ($20 billion) in Italy's biggest such deal so far.

has led clean-up efforts among Italian banks, which have been left with billions of euros of following the country's deep recession. The total amount of impaired debt is equivalent to around 15 per cent of total lending, three times the European average.

Morgan Stanley analysts estimated on Monday that at the current rate of rundown it would take Italian banks some 10 years to lower the share of soured debt over total loans to 5 percent.

first announced the deal in December and went on to raise 13 billion euros in a share issue to offset the hit to its balance sheet from loan writedowns that paved the way for the sale.

Rival Monte dei Paschi di Siena had to seek state help after failing to tap markets for cash. The Tuscan bank this month agreed a bailout that will allow it to offload 26 billion euros in bad debts.

booked 8 billion euros in loan losses in the fourth quarter partly because it wrote down the bad debt to be sold to just 13 cents to the euro. This represented a lower-than-average price which the Bank of Italy said should not be seen as a benchmark.

The loans have been transferred to vehicles that can sell them repackaged as securities and in which and have taken majority stakes.

said on Monday the sale would have a negative effect of 30 basis points on its core capital as the positive impact of cutting problem assets was more than offset by the need to re-evaluate the riskiness of its loan book in light of the loss suffered on the portfolio sold.

Bad loan specialist Banca IFIS estimated in a report published on Monday that UniCredit' deal would help to bring overall sales of impaired bank debts in Italy to 104 billion euros this year after sales totalling 36 billion euros in 2015-2016.

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