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UPDATE 1-Shares in Italian bad loan specialist doBank surge in market debut
July 14, 2017 / 9:27 AM / 3 months ago

UPDATE 1-Shares in Italian bad loan specialist doBank surge in market debut

(Recasts with details)

By Valentina Za and Massimo Gaia

MILAN, July 14 (Reuters) - Shares in doBank surged on their Milan market debut on Friday after an initial public offering that valued the Italian debt collector at 704 million euros ($803 million).

Italy’s debt servicing industry is experiencing strong growth as the country’s lenders face pressure from regulators to cut soured debts that rose to 349 billion euros due to a harsh recession that ended in 2014.

By 0920 GMT shares in doBank traded at 10.27 euros each, up 14 percent from an IPO price of 9 euros.

U.S. fund Fortress Investment Group, which remains doBank’s majority shareholder, has pocketed 312 million from the IPO after placing a 44.3 percent stake on the market.

The float could rise to nearly 50 percent if Fortress exercises an option to sell more shares.

Fortress bought UCCMB, the bad loan manager of Italian bank UniCredit in 2015, and went on to merge it with rival Italfondiario to create industry leader doBank, which is estimated to manage 77 billion euros in gross bad loans.

“We believe it to be an excellent investment given doBank’s market positioning and the fact that bad loan management is a top priority for Italian banks - and therefore for the country - at this juncture,” said Gerardo Murano at ADB Corporate Advisory.

Consultancy PWC estimates that Italian servicers managed up to 155 billion euros in bad bank debts last year. Roughly half of that is outsourced by banks, the rest by specialised investors which bought bad loan portfolios from lenders.

Italy’s Creval said late on Thursday it had closed the sale of 1.4 billion euros in gross bad debt.

“We expect the share of bad loans managed by independent non-performing loan servicers will continue to rise in the near future, reaching around 200 billion euros by 2018,” PWC said.

PWC also estimated that sales of bad debts by Italian banks could top 60 billion euros this year. Sales have been slow so far as, despite heavy writedowns in recent years, banks can only offload soured loans at a loss.

When bidding for a bad loan portfolio, buyers typically team up with a service company. Some investors have followed in Fortress’ steps and taken over a soured loan specialist.

Earlier this year Bain Capital Credit bought Italian bad loan platform Aquileia Capital Services. Another U.S. fund, Varde Partners, took a 33 percent stake in independent servicer Guber in April.

Collection activities vary on the type of loan.

Personal loans are generally handled through phone and door-to-door collection. Recovering loans backed by collateral, such as real estate assets, is more complex, requiring at times a conversion of an unfinished property site. ($1 = 0.8763 euros) (Additional reporting by Elisa Anzolin; Editing by Keith Weir)

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