Atlante (private equity fund)

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Atlante is an Italian private equity fund that dedicated to recapitalize some Italian banks, as well as purchase the securitizated junior non-performing loans.

On Friday 15 April 2016 Intesa Sanpaolo had announced that the bank would invest €800 million to €1,000 million to the fund, with the total size of the fund would varies from €4 billion to €6 billion.[1] On the same day Banca Popolare di Milano, Banca Popolare dell'Emilia Romagna, Credito Valtellinese, Banca Monte dei Paschi di Siena, Banca Carige announced that the bank would invested €100 million,[2] €100 million,[3] €60 million,[4] €50 million[5] and €20 million[6] respectively in the fund. On the following Monday, a €200 million investment from UBI Banca was announced.[7] On the same day UniCredit formally announced that the fund would be sub-underwriting the IPO of Banca Popolare di Vicenza.[8] On 20 April Cattolica Assicurazioni's €40 million investment was announced.[9]

According to Federico Ghizzoni, the CEO of UniCredit, despite the bank may inject €1 billion to the fund, the bank had a priority to sell their sofferenze to the fund.[10] UniCredit had about €20 billion net value of sofferenze in the balance sheets as at 31 December 2015.[11] Moreover, both UniCredit and Intesa Sanpaolo (via Banca IMI) were already under-written Banca Popolare di Vicenza and Veneto Banca for a combined €2.5 billion capital increases. The contributions of the fund would make the fund becoming the buyer of the unsold shares, instead of the banks themselves. As BPVi announced that the new shares would priced between €3 to €0.1 per shares, the fund on behalf of UniCredit would purchase the unsold share for €0.1 only.[12]

It was reported that bank foundations, such as Fondazione Cariplo, Fondazione Cariparo, Compagnia di San Paolo[13] and Fondazione CRT,[14] which in previous banking reforms were forced to sell their banking subsidiaries (forced to diversify investments),[15] were invited to invest in the fund.[16][17] According to ACRI, the foundations had €40 billion shareholders' equity,[18] with most of them no longer owning their banks in majority or entirely sold. Fondazione Cariplo, a shareholder of Intesa Sanpaolo and the management firm of the fund, had a shareholders' equity of €8.9 billion.[19]

On 29 April 2016 Quaestio announced that the fund had collected €4.249 billion from 67 investors including Cassa Depositi e Prestiti.[20]

Backgrounds

Bad debts crisis of Italy

The Italian banking sector was suffer from the impact of the recession of the country. According to Banca d'Italia (the central bank), the non-performing loans (NPLs) of the whole banking system stood at €360 billion gross book value in December 2015 (peaked in September 2015) with more than half were sofferenze (€210 billion, sofferenze was not equal to the harmonized definition of bad debt, defined by European Banking Authority in January 2015).[21] The 5 largest banking group (by total assets), namely: UniCredit, Intesa Sanpaolo, Banca Monte dei Paschi di Siena (BMPS), UBI Banca and Banco Popolare, had €225 billion of NPLs (€135 billion were sofferenze among the NPLs) in gross book value in that period.[21] According to 2015 annual report, UniCredit had a gross book value of €79.760 billion of NPLs at 31 December 2015, or €38.920 billion after write-down.[11] The amount of sofferenze (equal to harmonized definition of bad debt) after write-down was €19.924 billion at 31 December 2015 (€51.089 billion in gross).[11] During the year UniCredit also sold a subsidiary now known as doBank to a private equity fund, which including a gross book value of €2.4 billion NPLs portfolio.[11] BMPS had a gross book value of sofferenze (ditto.) for €26.627 billion and €9.733 billion in net.[22]

While among the large to medium banks (total assets larger than €21.5 billion, minus the top 5 banks[nb 1]) had a total NPLs of €76 billion and €41 billion sofferenze in gross book value.[21] Banca delle Marche, CariChieti, CariFerrara and Banca Etruria, the four small-sized banks (definition of small: total assets between €21.5 billion and €3.6 billion) that were rescued on 22 November 2015, had written down €8.5 billion of sofferenze to €1.5 billion (and transferred to a "bad bank", REV - Gestione Crediti, a company without banking license, in early 2016), causing Italian National Resolution Fund for about €3.6 billion to bail out[23] (the amounts "bailed-in" by the shareholders and subordinated bond holders, were not know) The fund was sourced from mandatory contributions of the whole banking system, following the enforcement of the new Bank Recovery and Resolution Directive of the EU in Italy in 2014.[23] However, the bail out also overdraw future contributions of the banks as the annual contributions of 2014 were not enough for the bail out.

If including the data from large to micro banks (whole system minus top 5 banks), the gross book value of NPLs was €135 billion, €75 billion of them were sofferenze.[21]

At the same time in order to boost the securitization of sofferenze, Italian government had guarantee the senior tranches of the securitizated NPLs. (Garanzia sulla Cartolarizzazione delle Sofferenze),[24] which in line with the strict rule of state aid by the European Union, as junior loan was excluding from the guarantee scheme.

New shares facing low demands

Moreover, among the first 14 largest Italian banks that were supervised by European Central Bank directly,[nb 2] they were required a higher CET1 ratio after Supervisory Review and Evaluation Process (such as over 10% CET1 ratio for BMPS[26] and Banca Popolare di Vicenza[27]). In 2015 banks such as BMPS (for about €3 billion) and Banca Carige were recapitalized. In 2016 three of the aforementioned 14 banks, Banco Popolare, Banca Popolare di Vicenza and Veneto Banca, also announced the plan of recapitalization of €1 billion, €1.5 billion[27] and €1 billion[28] respectively. BP Vicenza and Veneto Banca were under-written by UniCredit and Banca IMI (Intesa Sanpolo) respectively,[28] the two largest banks of Italian banking system. However, as most of the banks were under-capitalized, market capitalization under their value of net equity, plus low profit margin, making the new shares of BP Vicenza may purchased by UniCredit entirely due to low demand,[29] triggering a domino effect of causing UniCredit to recapitalize itself.

Responses

Fitch Ratings announced that the contributions to the fund may weaken the large banks.[30]

Operations

Atlante subscribed the entire capital increase of BPVi after Borsa Italiana rejecting the listing of the bank. Offer other than Atlante were voided.[31]

Management

The fund was managed by Quaestio Capital Management SGR S.p.A., a wholly owned subsidiary of Quaestio Holding S.A., which was owned by Fondazione Cariplo (37.65%), Fondazione Cassa dei Risparmi di Forlì (6.75%), it (18%), Locke S.r.l. (22%) and Direzione Generale Opere Don Bosco (15.60%).[32]

Stakeholders

Footnotes

  1. ↑ Banca d'Italia did not disclose the full list, but roughly equal to 9 others banks that were supervised by European Central Bank directly, plus BNL, Cariparma, Crediop, Deutsche Bank S.p.A. (subsidiaries of foreign banking group), Banca Mediolanum and Credito Valtellinese
  2. ↑ The top 5, plus Mediobanca, Banca Popolare dell'Emilia Romagna, ICCREA Holding, Banca Popolare di Milano, Banca Popolare di Vicenza, Banca Carige, Veneto Banca, Banca Popolare di Sondrio and Credito Emiliano[25]

References

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  11. ↑ 11.0 11.1 11.2 11.3 Lua error in package.lua at line 80: module 'strict' not found.
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  21. ↑ 21.0 21.1 21.2 21.3 Lua error in package.lua at line 80: module 'strict' not found.
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  27. ↑ 27.0 27.1 Lua error in package.lua at line 80: module 'strict' not found.
  28. ↑ 28.0 28.1 Lua error in package.lua at line 80: module 'strict' not found.
  29. ↑ Lua error in package.lua at line 80: module 'strict' not found.
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  31. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  32. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  33. ↑ Lua error in package.lua at line 80: module 'strict' not found.

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