Bain advising Italian Banca Carige over €1.2 billion bad debt

24 August 2017 2 min. read

Italian lender Banca Carige is considering a sale of the platform it uses to manage bad loans, according to sources familiar with the firm. The firm is reportedly being assisted by consulting firm Bain & Company as it prepares to offload over €1 billion of bad debt.

Banca Carige is set to make use of Europe’s growing non-performing loans market in order to offload €1.2 billion of bad debt. Following the Italian government’s 2016 commencement of breaking up previously nationalised banks, the state rescue of Monte dei Paschi di Siena earlier in 2017, and the recent liquidation of two more failing regional banks, Genoa-based Carige has become one of the final remaining large Italian lenders with problems, as the national economy looks to recover.

Carige has already transferred €938 million in bad loans to a vehicle that will repackage them as securities and sell them to investors. It is understood that further options being studied by Carige for the €1.2 billion disposal, include the sale of its bad loan management platform. Shares in Italian debt collector doBank meanwhile debuted in Milan on Friday, rising as much as 17%.

Bain advising Italian Banca Carige over €1.2 billion bad debt

Meanwhile, although Bain & Company has not yet commented, the consulting firm is said to be advising the bank on the deal according to sources at the ailing fiscal institution. Bain, who also maintain a regional presence via network venture fund R204, have previously worked on restructuring in notable cases including Office Depot and a number of South Korean firms in the country’s struggling industrial sector.

The Italian debt servicing industry is expanding fast with banks in the country under pressure from regulators to reduce their holdings of impaired loans that rose to a total of €349 billion during a harsh recession. Carige, which has been dogged by governance problems and has changed its chief executive twice in little over a year, plans to raise up to €500 million in a share issue.

Italy's ninth-largest bank has also been told by the European Central Bank it must cut its bad loans to €3.7 billion by the end of 2019 from €7.3 billion last year, in a similar strategy to that being talked about regarding Banca Carige. doBank, Italy's biggest debt servicing company, was created from the bad loan management platform that UniCredit sold to U.S. fund Fortress Investment Group in 2015.