October 30, 2019 / 1:24 PM / 7 months ago

Italy's Cerved aims to combine credit management unit with debt buying businesses

MILAN, Oct 30 (Reuters) - Italy's Cerved would like to combine its debt management division with a debt purchasing business as it studies a possible sale or merger of the unit, its chief executive said.

The company in September hired Mediobanca as an adviser to look at options for its division which manages 54.5 billion euros in loans, mostly impaired.

"We believe there is a consolidation trend in the market and size will matter in this business going forward," CEO Andrea Mignanelli told an analyst call on Wednesday.

Italy's loan recovery industry has grown quickly in recent years fed by some 170 billion euros in impaired loans which banks have been forced to offload to meet supervisory demands.

With disposals easing, players are now looking to bulk up in the face of increased competition and regulatory changes.

A deadline expires on Thursday for Credito Fondiario, an Italian bank and bad loan specialist owned by U.S. fund Elliott Capital Advisors, to reach an accord with Venice-based Banca IFIS on a debt collection partnership.

Mignanelli said Cerved had done very well so far focusing solely on managing debt, but it was increasingly important to have the ability to buy it, especially bank loans, to give a competitive advantage.

"It'd be better to have alliances or joint-ventures or to dispose of the division and put it in a context where credit management could be combined with credit acquisition," he said.

Credito Fondiario and IFIS had initially discussed the possibility of also combining their debt purchasing activities but then decided to limit the accord to the debt collection businesses when they extended their exclusive talks.

Sources have said the deal had proven more complex to hammer out than anticipated. The boards of the two companies meet on Wednesday for a final review of the deal.

Cerved started looking at options for its loan managing unit after losing a 10-year contract with Monte dei Paschi di Siena in June which the bailed-out bank decided to end early to have more freedom to shed bad debts.

Banks which seal partnerships on bad loan management are then forced to hold onto the loans.

Cerved also sought to team up with Elliott and Bain Capital in a tender for a package of soured debts and a majority stake in a bad loan unit put up for sale by Eurobank, but the Greek lender entered exclusive talks with rival bidder PIMCO, one of its shareholders. (Reporting by Valentina Za Editing by Alexandra Hudson)

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