Atlante is an Italian private equity fund that dedicated to recapitalize some Italian banks, as well as purchase the securitizaties of the junior trenches of non-performing loans. The fund was under regulated by EU Alternative Investment Fund Managers Directive.
According to Federico Ghizzoni, former CEO of UniCredit, despite the bank may inject €1 billion to the fund, the bank had a priority to sell their bad loan to the fund. UniCredit had about €20 billion net value of bad loan in the balance sheets as at 31 December 2015. Moreover, both UniCredit and Intesa Sanpaolo (via Banca IMI) were already under-written Banca Popolare di Vicenza and Veneto Banca for a combined €2.5 billion capital increases. The contributions of the fund would make the fund becoming the buyer of the unsold shares, instead of the banks themselves. As BPVi announced that the new shares would priced between €3 to €0.1 per shares, the fund on behalf of UniCredit would purchase the unsold share for €0.1 only.
It was reported that banking foundations, such as Fondazione Cariplo, Fondazione Cariparo, Compagnia di San Paolo and Fondazione CRT, which in previous banking reforms were forced to sell their banking subsidiaries (forced to diversify investments), were invited to invest in the fund. According to ACRI, the foundations had €40 billion shareholders' equity, with most of them no longer owning their banks in majority or entirely sold. Fondazione Cariplo, a shareholder of Intesa Sanpaolo and the management firm of the fund, had a shareholders' equity of €8.9 billion.
On 29 April 2016 Quaestio announced that the fund had collected €4.249 billion from 67 investors including Cassa Depositi e Prestiti.
The Italian banking sector was suffer from the impact of the recession of the country. According to Banca d'Italia (the central bank), the non-performing loans (NPLs) of the whole banking system stood at €360 billion gross book value in December 2015 (peaked in September 2015) with more than half were sofferenze (€210 billion, means bad loan). On average, the total NPLs to total loans ratio was 18%, the highest among European Union.
The 5 largest banking group (by total assets), namely: UniCredit, Intesa Sanpaolo, Banca Monte dei Paschi di Siena (BMPS), UBI Banca and Banco Popolare, had €225 billion of NPLs (€135 billion were bad loans among the NPLs) in gross book value in that period.
While among the large to medium banks (total assets larger than €21.5 billion, minus the top 5 banks) had a total NPLs of €76 billion and €41 billion bad loan in gross book value. For example, Banca Popolare dell'Emilia Romagna's gross NPLs to total loan ratio was 23.28% or €11.395 billion in size.
If including the data from large to micro banks (whole system minus top 5 banks), the gross book value of NPLs was €135 billion, €75 billion of them were bad loan.
At the same time in order to boost the securitization of bad loan, Italian government had guarantee the senior tranche of the securitizated NPLs. (Garanzia sulla Cartolarizzazione delle Sofferenze), which in line with the strict rule of state aid by the European Union, as junior tranche was excluding from the guarantee scheme. Usually the riskiest junior tranche would be re-purchased by the banks themselves. However, a plan to disposal all tranches was planned, which Atlante was aiming for junior tranches.
Additionally, the bail-out of Banca delle Marche, CariChieti, CariFerrara and Banca Etruria along, the four small-sized banks (definition of small: total assets between €21.5 billion and €3.6 billion), had to write-down €8.5 billion of bad loan to €1.5 billion (and transferred to a "bad bank", REV - Gestione Crediti, a company without banking license, in early 2016), causing Italian National Resolution Fund for about €3.7 billion capital injection and recapitalization, as well as the bail-in of shareholders and subordinate bond investor. (The retail investors of the bonds were only refurbished in mid 2016)
New shares facing low demands
Moreover, among the first 14 largest Italian banks that were supervised by European Central Bank directly, they were required a higher CET1 ratio after Supervisory Review and Evaluation Process (such as over 10% CET1 ratio for BMPS and Banca Popolare di Vicenza). In 2015 banks such as BMPS (for about €3 billion) and Banca Carige were recapitalized. In 2016 three of the aforementioned 14 banks, Banco Popolare, Banca Popolare di Vicenza and Veneto Banca, also announced the plan of recapitalization of €1 billion, €1.5 billion and €1 billion respectively. BP Vicenza and Veneto Banca were under-written by UniCredit and Banca IMI (Intesa Sanpolo) respectively, the two largest banks of Italian banking system. However, as most of the banks were under-capitalized, market capitalization of the bank's were under their equity value, plus low profit margin, making the new shares of BP Vicenza may purchased by UniCredit entirely due to low demand, triggering a domino effect of causing UniCredit to recapitalize itself.
In December 2015 European Commission ruled that the bail out of Banca Tercas by the Fondo Interbancario di Tutela dei Depositi (FITD in short; mandatory deposit guarantee fund) was a state aid. The commission also ruled that the aid affect the market effectiveness, thus the bank must returned the aid to the deposit guarantee fund. Any bail-out by the government must in-line with new Bank Recovery and Resolution Directive of the EU.
However, the bail-out of Banca delle Marche, CariChieti, CariFerrara and Banca Etruria by the government (though utilized the mandatory contribution of all Italian banks), also bail-in of shareholders and subordinated bond holders, had cause public controversy that many bond holders were actually retail investors, making the Bank Recovery and Resolution Directive was unpopular as a tool to bail-out the bank. A private bail-out fund must be exist in order to solve the problem of the banking system. In early 2016, FITD added a voluntary scheme in its article of associations, which bail out Banca Tercas by voluntary contribution of the member banks of FITD. (It was followed by Cassa di Risparmio di Cesena, a small bank in mid 2016) Even before the introduction of the voluntary scheme, the officials of FITD had also declared that the fund could not bail out the aforementioned 4 banks entirely, due to small size of the fund. The resolution fund bail-out the banks by €3.7 billion only were in fact aided by bail-in. A large private equity fund was demanded if large to medium-sized banks of Italy were required to bail-out. Atlante was aimed at a size of €4 to 6 billion with a promise that the investment was profitable in order to attract investors in market condition.
Fitch Ratings announced that the contributions to the fund may weaken the large banks.
On Friday 15 April 2016 Intesa Sanpaolo had announced that the bank would invest €800 million to €1,000 million to the fund, with the total size of the fund would varies from €4 billion to €6 billion. On the same day Banca Popolare di Milano, Banca Popolare dell'Emilia Romagna, Credito Valtellinese, Banca Monte dei Paschi di Siena, Banca Carige announced that the bank would invested €100 million, €100 million, €60 million, €50 million and €20 million respectively in the fund. On the following Monday, a €200 million investment from UBI Banca was announced. On the same day UniCredit formally announced that the fund would be sub-underwriting the IPO of Banca Popolare di Vicenza.
Atlante subscribed the entire capital increase of BPVi (for €1.5 billion) after Borsa Italiana rejecting the listing of the bank. Offer other than Atlante were voided after the listing in the Borsa was denied. It was followed by purchasing most of the new shares of Veneto Banca (€988,582,329.50), which some investors of the new shares other than Atlante, excised their rights to withdraw after the listing to the Borsa also failed.
On 28 August 2016 Atlante employed Credito Fondiario as service provider in NPLs.
On 29 July 2016 Atlante signed a memorandum of understanding to buy the mezzanine notes of the securitized bad loan portfolio of Banca Monte dei Paschi di Siena for approx. €1.6 billion. BMPS was the weakest banks among the 51 banks of 2016 European Union bank stress test.
On 8 August 2016 Atlante II had raised €1.715 billion in order to finance the purchase of NPLs.
Following the announcement of annual Supervisory Review and Evaluation Process (SREP), which BPVi and Veneto Banca were barely above the new Tier 1 Capital requirement (10.75% and 10.74% respectively, verse required 10.25% Atlante deposited €310 million and €628 million respectively to the banks as advanced payments for future capital increases.
The fund was managed by Quaestio Capital Management SGR S.p.A., a wholly owned subsidiary of Quaestio Holding S.A., which was owned by Fondazione Cariplo (37.65%), Fondazione Cassa dei Risparmi di Forlì (6.75%), Cassa Italiana di Previdenza e Assistenza dei Geometri liberi professionisti (18%), Locke S.r.l. (22%) and Direzione Generale Opere Don Bosco (15.60%).
ShareholdersIntesa Sanpaolo (€845 million)
UniCredit (€845 million)
Cassa Depositi e Prestiti (€500 million)
Poste Vita (€260 million)
UBI Banca (€200 million)
Banco BPM (€150 million)
BPER Banca (€100 million)
UnipolSai (€100 million)
Compagnia di San Paolo (€100 million)
Fondazione Cariplo (€100 million)
Credito Valtellinese (€60 million)
Banca Popolare di Sondrio (€50 million)
Banca Monte dei Paschi di Siena (€50 million)
Fondazione CRT (€50 million)
Banca Mediolanum (€50 million)
Allianz (€50 million)
CreditRas Vita (€50 million)
Cattolica Assicurazioni (€40 million)
Banca Carige (€20 million)