Funds

Overview

The UTPs fund is established on a deal-by-deal basis through the contribution of bank loans UTPs – secured or unsecured/corporate – which may be contributed to the Fund from the banks, in the context of systemic transactions of de-leveraging and de-risking, providing a different solution to the banks in the UTPs management and align interests, also providing a new financing facilities to the company/borrower in order to recovery the performing status and enhance the credit recovery chances. These credits usually refer to companies in financial distress or other crisis situations in which it is very difficult for the bank to validly support the company/customer, including:

• inability to raise and invest financial resources (although in some cases these resources are already available);
• impossibility for the company in crisis to access new external finance;
• the presence of pledges and other executive/conservative acts and liens to guarantee the creditors of the company.

In all these situations, borrowers are still alive and to avoid bankruptcy or pre-bankruptcy procedures the fund has to properly run the company and be able to manage all the issues arising from a going concern business. The fund can: (i) invest new financial resources (both equity or super senior debt) to finance the restructuring of the company; (ii) evaluate all the scenarios and select the good development project to carry-on (if real estate company involved); (iii) sell the non-core businesses (or assets) and/or undertake all the actions a receiver or a bank can’t pursue.

The fund could be tailored with bank’s needs and set-up in strict cooperation with other partners (loan servicer and/or collector, real estate advisor, fronting bank for new loan issue or other banking services). The fund represents a “third way” for managing and extracting value from non performing portfolios, compared to the in-house management and the sale to third party at lower values, providing a better mechanism to align interests of banks and investors.

Overview

The Solution Fund is set-up on a deal by deal basis through the contribution in kind of real estate assets, real property rights or mortgage loans in the context of crisis situations such as:

• extra-judicial restructuring agreement (art. 67, Italian Bankruptcy Law) or judicial restructuring agreement (art. 182-bis, Italian Bankruptcy Law);
• debt restructuring proceedings (“Concordato Preventivo” art. 160, Italian Bankruptcy Law) or bankruptcy proceedings (“Concordato Fallimentare” art. 124, Italian Bankruptcy Law);
• extraordinary administration/liquidation or voluntary liquidation, compulsory liquidation;
• any other particularly complex situations in which it is possible to acquire the assets with a deep discount.

In these cases the asset is usually abandoned, ending up with an auction which lead to huge reductions in prices and values. The receivers of the procedures always have the following problems: (i) inability to raise financial resources both from investors and banking system; (ii) lack of competences to get a better valuation of the assets and start the development on the good ones; (iii) the presence of pledges and/or other executive/conservative acts and liens to guarantee the creditors of the company that reduce the actions the receivers can do from the procedure side to accelerate the disposal of the assets.

In all these crisis situations the fund could be the perfect vehicle to intervene and to get the assets in exchange of shares, granting a better recovery to the creditors of the procedure by the way of managing the complexity and finance the development with the capex necessary to make the asset ready to be sold after a more efficient management for a short period.

The Solution Fund can:

• issue >shares which represent a payment for creditors (“moneta concordataria”) within the insolvency procedure;
• raise new equity from investors in order to support investments/capex for the development projects through the emission of new class of shares;
• provide also new debt (super senior financing) when the assets become free from the previous liens;
• manage professionally and independently the real estate assets and optimize their liquidation/disposal.

In addition the fund:

• is an alternative way to manage secured portfolio of NPLs or UTPs compared to the sale;
• leads to an alignment of interests between the bank and the investors and improves the recovery curves expected by financial operators on their NPLs portfolios allowing a less penalizing disposal of the assets.

Pros for the banks that can:

• reduce the asset write-offs by the way of converting the loan into shares of the fund;
• retain an earn-out value coming from the development of the assets contributed into the fund and a more efficient management of the properties, also in a compliant structure supervised by Bank of Italy.

Overview

The REOCO fund aims at managing all the necessary activities for the repossessing of the real estate assets underlying the credits, providing the investors an efficient platform to deploy the assets recovery. It will be crucial in the new positioning and mission of Sagitta SGR as a player of the distressed asset management industry.

The REOCO fund can:

• invest into real estate assets;
• invest both into notes (Asset – Backed Securities) and secured credits for a maximum of almost half of the fund’s assets (49% of the NAV).

The fund is not subject to any taxation on capital gains and institutional investors will only pay taxes at the final dividend distribution (on a withholding tax basis).

The fund will exploit the core competences of the Arrow Global group team in the distressed asset market and its focus and expertise in the auction processes, bankruptcy and pre-bankruptcy procedures.

The REOCO fund could be directly involved into the secured loan purchase and not only in the repossessing phase. Sagitta SGR, thanks to its credit authorization, allows the fund to purchase directly the secured NPLs (according with the limit of 49% to be reach until 24 months from the first closing) and then to perform directly all the required actions for the repossessing of the asset and subsequent management without using a securitization vehicle.

Overview

Dedicated to institutional investors only, the PE funds will be focused on the purchase of majority equity stakes in SMEs that, despite a good P&L, are in financial troubles or other special situations which allow the fund to acquire the participation/going concern at highly speculative values. For examples:

• extra-judicial restructuring agreement (art. 67, Italian Bankruptcy Law) or judicial restructuring agreement (art. 182-bis, Italian Bankruptcy Law);
• debt restructuring proceedings (“Concordato Preventivo” art. 160, Italian Bankruptcy Law) or bankruptcy proceedings (“Concordato Fallimentare” art. 124, Italian Bankruptcy Law);
• extraordinary administration/liquidation or voluntary liquidation, compulsory liquidation;
• any other particularly complex situations in which it is possible to acquire the assets with a deep discount.

Targets are companies whose crisis are not due to product or market, but connected with external events, or complex situations easily unlockable after the debt restructuring procedure, such as: over-leveraged companies due to LBO; mismanagement problems or frauds; family succession issues; lack of liquidity caused by a difficult access to banking facilities; under-performing investments with returns lower than expected that have caused non sustainable debt.

The fund will invest in companies with the following criteria: (i) an appropriate management that could eventually be integrated with the fund support; (ii) that operate in industry/market with prospects for growth or at least stability; (iii) strong know-how and technology which represent a competitive advantage; (iv) successful entrepreneurial story before the crisis event.

The fund’s objective is the recovery of equity (“recovery capital”) over a period of 18-24 months.

Overview

The fund is established through the collection of financial resources from local investors, private bankers and other qualified investors and will create value leveraging the EI and Arrow Global management team competences and know-how in the distressed asset and NPLs market, being dedicated to the realization of securitization deals according to the Italian law on securitization (law 130/1999), with underlying secured and unsecured credits.

Non-performing loans may derive from insolvency procedures or other crisis situations arising from analysis and the deal pipeline of EI and Arrow Global group. The fund will be subject to certain asset allocation criteria and to certain concentration limits, as defined and envisaged in the fund regulation. The SGR will manage the fund by dedicating a team of professionals with experience in the NPLs sector.

The fund will be able to combine the following advantages now only referable to different investment structures:

• benefit from the tax and civil law advantages allowed by Law 130/1999, including those provided for by the recent changes as of 2019 release;
• allow the professional management (proper of the SGR) of the real estate assets deriving from the repossessment of the mortgage credits;
• attract institutional investors with an instrument (the Fund) more in line with their compliance needs, asset allocation and risk management requirements, compared to other investment vehicles (e.g. SPV 130).