Pirelli RE and Calyon, the Corporate and Investment Bank of the Crédit Agricole Group, have signed a binding agreement to form a joint venture that will invest in non performing loans in Europe. Under the agreement non performing loan portfolios will be acquired, in which Pirelli RE, consistent with its business model, is to hold a 33% interest and Calyon 67%.
The newly signed joint venture, which combines the experience of Pirelli RE in handling non performing loans in Italy with the international financial skills of Calyon, aims to become a leader in Europe, where growth potential is high especially in Italy, in Germany, considered the biggest market based on the value of NPLs held by its banks (about €300 billion by Ernst & Young estimates), and in Poland, where Pirelli RE has already created a platform for real-estate services and investments with Bank Pekao.
Concurrently the joint venture by Pirelli RE (25%) and Morgan Stanley Real Estate Funds (75%), established in August 2004 to invest in NPLs in the Italian market, has been wound up; the US investment bank remains a strategic partner of Pirelli RE in the office business.
The new joint venture has undertaken to acquire 100% of five non performing loan portfolios held since November 2004 by the Pirelli RE/MSREF JV through special securitisation vehicles, with a residual gross book value of about €2.6 billion (as at 31st December 2005). The overall purchase price is €918.5 million.
Previous investments undertaken jointly by Pirelli RE and Calyon will also come under the umbrella of their newly signed joint venture, including the non performing loan portfolio recently acquired from Banco Popolare di Verona e Novara. NPLs under management will then amount to approximately €3 billion (gross book value).
Following the formation of this new strategic partnership, Pirelli RE will buy from Morgan Stanley Real Estate Funds 53% of Credit Servicing S.p.A., in which already it holds 47%, and 25% of Asset Management NPL S.r.l, in which it holds 75%. Born at the beginning of 2006 from the merger of Servizi Immobiliari Banche S.p.A. (SIB) and Pirelli RE Credit Servicing S.p.A., Credit Servicing S.p.A. handles the recovery, both through the courts and otherwise, of loans secured on properties and boasts a nationwide presence that has depth and some 300 experts in the field. It was recently ranked as "above average" by the rating agency Standard and Poor's and shall continue to deal with future portfolios acquired in Italy by the Pirelli RE/Calyon joint venture and to pursue its business as a service provider to third-party customers.
Abroad, the agreements that have been signed provide for the development of management platforms in which Pirelli RE shall have a minimum 67% majority holding, in order to manage NPL portfolios in which Calyon will hold a 67% interest and Pirelli RE 33%.
It is expected that the operation shall be finalised by the end of November, subject to the approval of the Italian competition and market regulator and the trustees of the existing securitisation arrangements.
Bonelli Erede Pappalardo acted as the legal advisor to Pirelli RE; Calyon was advised by Clifford Chance.
Source: Pirelli RE