UniCredit readied 2 billion euro UTP loan securitisation serviced by Prelios-sources

MILAN (Reuters) – UniCredit is working to offload the bulk of the risk on a 2 billion euro ($2.2 billion) portfolio of “unlikely-to-pay” (UTP) loans it has securitised, three sources close to the matter said, adding Prelios would act as debt servicer on the deal.

After repackaging the UTP loans as securities, UniCredit is preparing to sell the riskier notes, meaning the junior and mezzanine tranches in the securitisation deal, the sources said.

By selling the securitised notes most exposed to potential losses, banks can gain regulatory approval to shift the underlying portfolio off their books, an accounting process known as de-recognition.

Representatives for both UniCredit and Prelios declined to comment.

The Italian bank held 10.9 billion euros in gross UTP loans at the end of last year, out of overall gross impaired loans worth 16.3 billion euros.

UTP loans are not yet in default and can be recovered by restoring borrowers to health but require more complex and specialised skills to manage.

Prelios, owned by U.S. fund Davidson Kempner Capital Management, since 2019 has a UTP partnership in place with rival Italian heavyweight Intesa Sanpaolo.

The accord with UniCredit bolsters Prelios’ revenue at a time when its owner DK could consider cashing out via a sale or an initial public offering, according to bankers.

UniCredit had invited bids at the end of last year to service a UTP portfolio with an initial size of 1 billion euros, later entering discussions with Prelios that resulted in the Milanese firm being picked as servicer for the UTP securitisation.

UniCredit and Prelios are also in talks over a separate servicing agreement on another portion of the bank’s UTP portfolios, one of the sources said.

UniCredit is also in talks with Prelios’ rival doValue over a potential extension of their loan collection agreement, doValue CEO Andrea Mangoni said in February.

($1 = 0.9201 euros)

(Reporting by Valentina Za; editing by David Evans)