Unione di Banche Italiane SpA transferred a portfolio of nonperforming loans with a gross book value of approximately €857.6 million to securitization vehicle Iseo SPV Srl.
The portfolio consists mainly of residential mortgages.
Meanwhile, Iseo will issue senior, mezzanine and junior notes fully subscribed by the Italian lender. The senior notes amounted to €335 million, while the mezzanine and junior notes amounted to €25 million and €13.5 million, respectively.
The bank said the senior notes carry a coupon equivalent to the six-month euro interbank offered rate plus 0.5%. UBI Banca will also apply for the senior bonds to be subjected to a guarantee by the Italian government.
UBI Banca added that it expects to incur an after-tax loss of about €20.8 million, to be recognized in its financial statement as of Dec. 31 due to the sale of the mezzanine and junior notes.
The deconsolidation of the NPLs underlying the securitization is expected to result in a decrease in the bank's pro-forma NPL ratio to 8.5% from 9.34% as of September. The bank's Texas ratio is also expected to fall to 61% from 66%. The deal would increase the bank's common equity Tier 1 ratio by about 10 basis points since it would hold less risk-weighted assets.