Yahoo Finance UniCredit Plans Risk Transfers Tied to €8.5 Billion of Loans
(Bloomberg) -- UniCredit SpA is working on three significant risk transfer deals linked to as much as €8.5 billion ($9 billion) of loans to Italian and German companies, according to people familiar with the matter.
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The Milan-based bank is selling two so-called SRTs linked to €3.5 billion of leasing contracts with Italian companies and €2 billion euros of Italian small and medium-sized businesses, said the people, who asked not to be named because the deal is private. UniCredit also plans to issue SRTs linked to as much as €3 billion of loans to German SMEs by the summer, according to the people.
A representative for UniCredit declined to comment when contacted by Bloomberg News.
SRTs — also known as synthetic risk transfers — allow banks to insure their loans against default by selling notes to pension, sovereign wealth and hedge funds. That enables lenders to tie up less of their own capital to meet regulatory requirements, while investors can pick up yields in the low double-digits.
Typically, a bank would obtain default protection for as much as 15% of potential losses. In return, investors receive a coupon on their holdings.
The size of the SRTs providing protection on the portfolio of Italian lease contracts and Italian SMEs may be about €200 million euros and about €120 million euros, respectively, the people said. The SRTs linked to the pool of German SME loans could be as much as €150 million, the people said.
They’ve become a fast-growing part of credit markets, totaling over €206 billion in 2023, up from around €97 billion in 2020, according to data compiled by AXA IM Alts. UniCredit rival, Banco Santander SA, is sounding out interest for potential synthetic-risk-transfer transactions linked to more than $6 billion in loans, which are tied to carmakers and other borrowers in Mexico and Brazil, people familiar with the matter said last month.
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