Leading global investment firm KKR & Co. L.P. KKR has launched a pan-European platform to acquire and manage “bad loans” sitting on the balance sheets of various banks in the country, particularly in Italy, with the help of a special vehicle. The newly launched platform is part of the company’s commitment to invest in European industries.
Notably, KKR will inject capital in companies underlying the banks’ non-performing as well as underperforming loans. Such funding will free up capital, otherwise held against their bad loan positions, which can be used to support growth opportunities. KKR will also engage its consultancy unit Capstone for providing operational expertise to these companies.
Reportedly, the company has already partnered with Italy’s largest bank, UniCredit SpA, as well as Intesa Sanpaolo SpA, through KKR Credit to transfer a €1-billion portfolio of non-performing loans to its 100% privately financed platform. The company also noted, “The platform is open to other lenders and companies who would benefit from fresh capital and additional operational support”.
According to data compiled by PwC, European banking industry houses €2 trillion in non-core assets, including €1.2 trillion in non-performing loans. KKR’s novel approach is a likely way out for banks which are apprehensive of recognizing losses from selling distressed loans at huge discounts.
Moreover, participant banks will benefit from the upside as and when the underlying companies perform better and value of the transferred assets increases.
We believe the latest move by KKR is a holistic mix of efforts, which seeks to revive the dismal European banking industry, and at the same time, caters to the company’s personal interest of attracting more and more business.
Currently, KKR carries a Zacks Rank #3 (Hold). Affiliated Managers Group Inc. AMG, AllianceBernstein Holding L.P. AB, and Woori Bank Co., Ltd. WF are better-ranked investment managers, each holding a Zacks Rank #2 (Buy).
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