* UniCredit unveils NPL, cash call plans
* Bank eyeing potential use of GACs scheme
* Barriers, volatility remain a hurdle
By Mariana Ionova
LONDON, Dec 13 (IFR) - Italy's UniCredit is poised to shed
17.7bn of non-performing loans into a securitisation vehicle,
as it seeks to bolster its balance sheet and raise fresh capital
The country's largest lender revealed plans on Tuesday for a
recapitalisation that includes the sale of a chunk of its
non-performing loans, a move expected to pave the way for a
mammoth 13bn equity raise in January.
The bad loans will be sold into two separate securitisation
vehicles, one managed by Pimco and the other by Fortress
Investment Group. UniCredit will retain minority stakes.
The transaction, dubbed Project Fino, will see 17.7bn in
loans securitised into tranches, with a minimum of 20% of the
notes sold to investors.
The plan will help UniCredit write off 8.1bn of its soured
debt in 2016. The bank has a total of 76.78bn in non-performing
loans, its September financial statements show. Some 51.31bn
are listed as "bad exposures", 23.37bn as "unlikely to pay" and
2.1bn as "past due."
"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," said
Jean Pierre Mustier, chief executive officer of UniCredit, in a
Mustier also confirmed market expectations that UniCredit
will consider using a new government guarantee created earlier
this year to help banks shed toxic loans through securitisation,
known as Gacs in Italians.
The bank is assessing "all options to optimise selling price
including tapping state guarantee Gacs for bad loan sales," he
told an analyst call on Tuesday afternoon.
The state guarantee is meant to insure the senior NPL
tranche, effectively bridging some of the gap between the book
value of the bad loans and what the market is willing to pay for
However, the Gacs scheme remains untested and there are
potential barriers to its use. Popolare di Bari, which
structured the market's first NPL deal with the guarantee in
mind, found itself paying up to attract junior and mezzanine
buyers once Atlante stepped back from the deal.
The scheme does not help banks place these riskier bonds,
yet issuers cannot derecognise the bad loans or obtain the Gacs
without selling this deeper risk.
There are also costs involved in the use of the scheme. In a
recent regulatory filing by Banca Monte dei Paschi di Siena,
which is planning to shed 27.1bn in loans through the scheme,
the estimated costs associated with using the guarantee were
pegged at 35m. In the same document, MPS estimated it could
place the senior notes in the securitisation at 72bp over
UniCredit's broader plan to revamp its balance sheet -
partly through the largest ever Italian cash call - comes at a
difficult time for Italy.
Last week, the result of the country's referendum vote
triggered political turmoil that nearly derailed a plan to
recapitalise MPS, Italy's third largest lender.
However, market participants noted that UniCredit is seen as
more resilient, with investors still willing to pitch cash into
"Of course, if Monte dei Paschi would have found a private
solution before, it would have been a good signal for
UniCredit," said one source close to the UniCredit situation.
"But I don't think the two banks are comparable. The two
stories are not directly linked."
However, several market participants noted the 13bn capital
raise is ambitious and far from straightforward, especially as
Italian banks continue to weather a sharp deterioration of
investor confidence this year.
"It's a massive undertaking," said one distressed debt
investor. "It's a stronger bank, but it still has issues as
well. I don't think it's going to be easy for them to raise
UniCredit's NPL disposal is expected to close by the end of
the first half of 2017. Morgan Stanley and UniCredit acted as
financial and structuring advisers on the deal.
(Reporting by Mariana Ionova, editing by Robert Smith and