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Elliott-backed Gardant clinches bad loan venture with Italy's BPER

FILE PHOTO: Italy's BPER Banca CEO Piero Montani presents a new business plan

By Valentina Za

MILAN (Reuters) -Italy’s BPER Banca on Monday said it had agreed a partnership with loan manager Gardant, which will team up with state-owned peer AMCO to help the bank offload up to 2.5 billion euros ($2.6 billion) in bad debts.

BPER was the only major Italian bank to still have full control of its debt recovery operations, which comprise staff dedicated to recouping problem loans and the technology they use.

The accord values the business at 150 million euros. Gardant, controlled by U.S. investment fund Elliott Management Corporation will acquire 70% of the unit, with BPER retaining 30%.

The Gardant-AMCO duo trumped rival bids by Sweden's Intrum, Davidson Kempner-owned Prelios and Softbank-backed doValue.

Reuters in May was first to report that Gardant had teamed up with AMCO in the hard fought deal for BPER's division.

Banks normally offload the recovery units at a profit which they use to offset the hit from simultaneous bad loan disposals.

BPER is shedding up to 2.5 billion euros in bad debts as part of the Gardant-AMCO deal.

It said the disposals would have no significant impact on its financial accounts and would cut problem debts to as low as 2.5% of total loans, from 4.2% in September.

By the end of the year, BPER will sell a first 1.5 billion euro bad loan portfolio to AMCO, which is able to bid higher than privately-owned rivals in tenders thanks to lower funding costs.

Under a 10-year management accord, the new Gardant-controlled joint venture will handle part of BPER's existing bad loans, including some of those which it is selling.

It will also get 90% of all new defaulted loans and 50% of new 'unlikely-to-pay' loans - which are not yet in default.

Gardant had struck a similar deal with Banco BPM four years ago.

"Our partnership with Banco BPM has been a great success," Gardant CEO Mirko Briozzo said.

"This deal brings our assets under management (AUM) to around 42 billion euros, turning us into a leading industry player in terms of volumes and collections," he added.

Gardant had 19.9 billion euros in AUM at the end of 2021, according to a report by consultancy PwC, compared with market leader doValue's 75.9 billion euros.

Briozzo said a task force would work in the next few months to get the partnership off the ground and ensure it can soon run at full steam.

Italy became Europe's biggest market for soured bank loans after its lenders shed almost 200 billion euros in bad debts since a 2015 peak.

KPMG worked with BPER on the deal. Rothschild & Co was Gardant's financial adviser. ($1 = 0.9538 euros)

(Reporting by Valentina Za and Andrea Mandala; Editing by Agnieszka Flak, Philippa Fletcher and Conor Humphries)