October 30, 2019 / 7:50 PM / 22 days ago

Deal talks between IFIS and Elliott-owned Credito Fondiario collapse

MILAN (Reuters) - Italian bad loan specialists Banca IFIS (IF.MI) and Credito Fondiario on Wednesday ended talks to set up a debt recovery partnership with IFIS citing disagreements over governance.

Italy’s loan collection industry has grown rapidly in recent years, fed by some 170 billion euros in impaired loans which banks have been forced to offload to meet supervisory demands.

With the rate of disposals easing, players are now looking to bulk up in the face of increased competition and regulatory changes.

Venice-based IFIS, which is controlled by the von Furstenberg family, entered exclusive talks in August to fold its debt purchase and recovery businesses into a new unit that would become part of Credito Fondiario, in which U.S. investment fund Elliott Management Corp has an 82% stake.

The two parties extended the exclusive talks by one month and narrowed the scope of the accord to the debt recovery business alone as the deal proved more complex to hammer out than anticipated.

Two people close to the matter said the stumbling block had been IFIS’ request to retain some operational control of the merged recovery operations despite having a minority stake in the new entity.

IFIS said the bad loan business remained a strategic one for the bank, which on Wednesday bought out minority investors in FBS, a rival debt collector acquired in 2018.

Credito Fondiario said it remained a buyer in Italy’s consolidating impaired loan market.

“We will continue to have an active role in the market ... including looking for agreements with other players in the debt servicing and debt purchasing sectors,” Managing Director Iacopo De Francisco said.

One of the sources said Credito Fondiario may look at rival Cerved which is considering a possible sale or merger of its debt management unit.

The unit, which analysts have valued at 450-490 million euros, on Tuesday reported a 29% rise in nine-month revenue.

Speaking to analysts after the results, Cerved (CERV.MI) CEO Andrea Mignanelli said the group would be happy to combine its debt management division with a debt purchasing business.

With Elliott looking for ways to divest, Credito Fondiario has hired Goldman Sachs and Deutsche Bank to assess strategic options.

De Francisco said the bank was still also considering an eventual stock market listing. Some bankers, however, say an IPO may prove challenging in an industry past its peak, given how strongly cyclical the business is.

Credito Fondiario manages 52 billion euros in problem loans and Cerved 54.5 billion, meaning a tie-up would turn it into Italy’s biggest bad loan specialist, leapfrogging current market leader doValue (DOVA.MI).

Reporting by Valentina Za, editing by Silvia Aloisi and Kirsten Donovan

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