March 21, 2020 / 4:05 PM / 9 days ago

UPDATE 1-Italy's Cerved says talks with Intrum halted due to coronavirus

(Adds comments from sources)

By Valentina Za

MILAN, March 21 (Reuters) - Italian financial group Cerved said on Saturday talks to sell its debt collection arm to Europe’s biggest loan recovery firm, Intrum, had fallen through due to the coronavirus outbreak that is wrecking Italy’s economy.

The Italian government expects gross domestic product to shrink by 3% this year after imposing a nationwide lockdown to fight the virus, which has killed more people in Italy than in any other country.

Intrum Italy and Cerved entered exclusive talks in mid-February a few days before the emergence of the virus, which has since caused more than 4,000 deaths and infected at least 47,021 people.

Cerved said in a statement that an exclusivity period granted to Intrum Italy had expired on March 20, and talks had been halted due to “the current economic and financial situation attributable to the COVID-19 epidemiological emergency.”

Two people familiar with the matter said both sides remained opened to resuming discussions down the road.

Sources had said Intrum Italy had offered more than 450 million euros for Cerved’s bad-loan collection unit.

The deal was seen as the first major consolidation move in Italy’s bad-loan sector, where growth was easing after a boom driven by large-scale sales as banks cleanse their balance-sheets of the legacy of previous recessions.

Cerved had been looking at a possible sale of its bad loan unit after the early termination of a collection contract with bank Monte dei Paschi di Siena so as to concentrate on its credit data business.

Italy’s new economic slump is expected to trigger another surge in unpaid debts, while also making it harder to recoup existing problem loans.

A spokesman for Intrum Italy declined to comment, referring to a March 13 statement by Intrum.

The Swedish group has said the coronavirus emergency prompted it to reduce its investment levels and hike the rate of return required for new investments, adding that it was reviewing ongoing M&A projects and prioritising a share buyback.

Intrum said it expected a delay in cash flows in Italy, where courts have shut down. It said it had taken “comprehensive measures to ensure that we are able to conduct business as usual, as far as practically possible.”

Italy in 2019 accounted for 4% of Intrum’s total cash earnings before interest, tax, depreciation and amortisation. (Reporting by Valentina Za; editing by Helen Popper)

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