KKR to develop bad loan vehicle with two Italian banks

The investment specialist has signed a memorandum of understanding with UniCredit, Intesa Sanpaulo and restructuring specialist Alvarez & Marsal as a precursor to establishing a vehicle that would house some of the lenders' distressed corporate loans.

US private equity firm KKR is one step closer to establishing a bad loan vehicle with two of Italy’s biggest banks Unicredit and Intesa Sanpaulo, after it emerged that the firm has signed a memorandum of understanding along with restructuring advisor Alvarez & Marsal (A&M) and the two lenders.

The four parties have agreed to jointly develop and implement a solution to manage the performance and maximise the value of a selected corporate loan portfolio under restructuring, according to a statement on Tuesday.

Additional funding at the asset level could be made, it said. Discussions are ongoing. KKR and A&M were selected by the banks for their restructuring capabilities and willingness to provide fresh capital to the assets in question if required, a source close to the process said. 

The announcement follows the chief executive of UniCredit, Federico Ghizzoni, confirming in February that the banks were in discussions with KKR over a vehicle to house restructured loans from both lenders. 

Each bank will reportedly put €1 billion worth of loans into the vehicle. A KKR spokeswoman declined to comment on the likely composition of assets within the vehicle. 

As of 31 December 2013, UniCredit had a total of €6.2 billion in restructured loans on its books, down from €8.1 billion as of 31 September. Non-performing loans amounted to €47.6 billion. Intesa had €2.5 billion worth of loans under restructuring as at 31 September.