Bayside in a July 7 statement announced it had launched and hit a first close on the IDeA Corporate Credit Recovery I fund – the point at which it can begin spending the money – at €260 million.
On the initiative, which was first announced in May 2015, Bayside has teamed up with Italian private equity firm Idea Capital Funds to acquire loans in eight mid-sized companies that are in distress. The loans come from seven Italian banks, including UniCredit, BNL/BNP Paribas, Banca Popolare di Vicenza, MPS, BPM and Biverbanca.
Instead of the fund purchasing the loans, they have been contributed by the banks in return for taking a stake in the fund. The vehicle will also provide money to “to support the turnaround and growth” of the borrower companies, the statement said.
The fund close comes amid a period of uncertainty for Italy’s banks that are under increasing strain following the UK’s vote to leave the European Union. Some 17% of the loans that banks in Italy hold are sour – nearly 10 times the level in the US, according to a report in the Wall Street Journal. Italian banks are now under pressure to offload some of these soured assets.
Giuseppe Mirante, managing director of HIG Bayside and a member of the fund’s investment committee, said: “Private equity managers and distressed debt funds have been trying to break in to the Italian market for quite some time.”
He added: “For a combination of political, economic and regulatory reasons, the Italian banks have been incentivised to kick the can down the road,” but that was beginning to change with banks now being encouraged to deal with soured loans.
Mirante added that his firm was keen to roll out similar funds to buy up bad bank debt in other parts of Europe such as Portugal, Greece, Spain or even Eastern Europe.
Other private equity firms have also launched vehicles to acquire distressed loans from Italy’s banks. US private equity giant KKR launched its European credit platform Pillarstone in September 2015. The platform has so far acquired loans from Italian and Greek banks.