November 29, 2019 / 7:34 PM / 8 days ago

UPDATE 1-Italy prepares to inject 1 bln euros in bad loan manager AMCO

(Adds comment from source, details)

By Valentina Za and Stefano Bernabei

MILAN, Nov 29 (Reuters) - Italian state-owned bad loan manager AMCO said on Friday it would raise 1 billion euros ($1.1 billion) in fresh capital by the end of the year as it prepared to take on more soured bank loans.

AMCO, which is fully owned by the Treasury, has grown to play a key role in Italy’s bad loan market after taking on 18 billion euros in impaired debts from two regional lenders that were wound down in 2017.

AMCO is now set to intervene in the rescue of Banca Carige by ridding the lender of some 3 billion euros in problem loans. A source close to the matter said the capital raising would give AMCO firepower to buy Carige’s loans.

Sources have told Reuters that AMCO could also take on some 10 billion euros in impaired debt from state-owned Monte dei Paschi di Siena in a deal which Italy has been negotiating for months with EU competition authorities.

A second source close to the matter said the capital injection from the Treasury would be instrumental for the Monte dei Paschi deal.

AMCO declined to comment.

Italy is still to win approval from Brussels for the proposed Monte dei Paschi’s bad loan spin-off. A decision is expected in the next few weeks. The plan under discussion envisages sparing the bank from losses while hitting its shareholders instead, and the EU Commission needs to make sure it does not violate state aid laws.

The latest bad loan clean-up at Monte dei Paschi is seen as key for the Treasury to be able to find a buyer for the lender and re-privatise it by the end of 2021 as agreed with the EU Commission.

In the past three years Italian banks have shed some 180 billion euros in loans that turned sour during a deep recession. Such sales are normally carried out at a loss, requiring lenders to have ample capital buffers.

AMCO can play a role in helping weaker lenders to shed soured debts because it needs lower returns compared with a regular speculative investor, and can therefore afford to pay a higher price for the loans it buys off banks.

“The capital boost will support AMCO in its goal of expanding its business, boosting assets under management, through the purchase of new portfolios,” AMCO said in a statement.

The transaction will boost AMCO’s capital to 1.8 billion euros from 800 million at present. ($1 = 0.9073 euros) (Reporting by Valentina Za and Stefano Bernabei Editing by Leslie Adler)

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