UniCredit to sell €17.7bn NPLs to Fortress and PIMCO

The sale of the underperforming assets is part of former Tikehau partner turned UniCredit CEO Jean-Pierre Mustier’s plan to streamline the bank’s operations and deleverage its non-core portfolio.

Italian bank UniCredit is to offload non-performing loan portfolios valued at almost €18 billion to two entities managed by private credit groups Fortress and PIMCO as part of its push to deleverage its non-core portfolio.

The transaction is expected to close in the first half of 2017, pending regulatory approval.

The assets with a gross book value of €17.7 billion will be placed into two separate vehicles, where both Fortress and PIMCO will take majority ownership. UniCredit will acquire a minority stake in the platforms.

Selling off the underperforming assets is part of the bank’s plan to streamline its operations. In July, Former Tikehau partner Jean-Pierre Mustier returned to the bank as chief executive following the departure of Federico Ghizzoni. Mustier was previously at the bank for three years, leaving in 2014 to join Tikehau.

Part of this plan has seen the bank dump its minority stake in Bank Pekao, a Poland-headquartered financial institution and sell off asset manager Pioneer Investments. Mustier has also announced a cut in the bank’s total workforce by 11 percent and has plans for a €13 billion capital raise, a statement that has been received positively by the markets.

Mustier said: “The transaction to de-risk a €17.7 billion NPL is yet another strategic direction we announced in July this year. We are taking decisive action to deal with our legacy issues to significantly improve the quality of our balance sheet and lay the foundation for future recurring profitability”.

Under pressure from the European Central Bank, Italian banks are clearing out their underperforming assets, estimated to be worth €360 billion. As a result, private debt funds are starting to see opportunities. Earlier this year, real estate debt-focused investment manager AnaCap acquired a NPL portfolio valued at €2 billion. Algebris launched its second fund recently, a strategy that focuses on acquiring NPLs from leading Italian institutions.

“Through our investment in NPLs, we help Italian banks to clean their balance sheets, a condition necessary to re-start lending activity and to complete capital increases,” said Davide Serra, chief executive of Algebris.

PIMCO declined to comment. UniCredit and Fortress did not respond to requests for comment.