“Debitos is already well-known in Italy”
Debitos has been active in Italy since 2017, the most important NPL market in Europe. Last year, the first transactions were carried out via the online platform, including the sale of a EUR 2.1 billion portfolio together with cooperation partner EY Italy. Now the credit marketplace wants to expand its activities in Italy and has appointed Francesco Paolo Bellopede (40) as its new Country Manager. In the interview, Francesco and Debitos CEO Timur Peters talk about developments in the Italian NPL market – and the next steps of the Frankfurt company.
Francesco, what have you been doing before moving to Debitos?
Francesco: “I have almost 15 years of experience in London, mostly working on illiquid assets and structural finance. I started working with RAIT Financial Trust, a company that was for example involved on the buy side in structured finance for illiquid products and real estate financing. They focused mainly on Spain, Portugal, Italy and Greece in a structured finance CDO platform that was in 2012 acquired by Fortress. I launched a new business for an US broker and opened their European office in London. We were involved in the secondary trading of illiquid loans and bonds, for example Greek bonds. In 2014 I started to work at Stern Agee, another broker dealer. For example, I was in illiquid products and claims linked to the Lehman Brothers bankruptcy and other secondary deals, especially single name corporate distressed. The firm was under acquisition from Stifel and was merged when I was there for less than six months. The London office was closed so I moved on the Flexagon Capital Solutions platform which is also located there.”
What was the main focus of Flexagon?
Francesco: “I was working with a focus on the Southern European market. Between 2015 and 2017 – and later on as well – we concentrated mainly on SMEs in the Italian market with a high growth potential or distressed situation. So my focus along the line was on Italian corporates, structured finance and debt or illiquid products. I joined Debitos in May 2019.”
When did you first came across the name “Debitos”?
Francesco: “The first contact between me and Debitos was linked to the first deal that they did in Italy – the Cerberus acquisition of the “Arcade portfolio”. The “Arcade portfolio” has been on the desks of many Italian banks. It originated in San Marino and other Italian banks and I am originally from the province near San Marino. I got knowledge through the media about this deal, so I contacted Timur and we arranged a meeting in Milan. We started a conversation about the Italian NPL market – and how to develop it. We very quickly found common points on the market and common contacts as well. There is quite a number of people that used to work in London and now work for Italian banks that I know. And I will try to make that work for Debitos now.”
“I think we offer an ideal solution especially for the small and mid-sized banks that do not have the infrastructure to execute the transactions on their own.” – Francesco Paolo Bellopede
How would you describe the Italian NPL market at the moment?
Timur: “Italy is next to Spain and Greece the main focus for Debitos. The Spanish market is already very developed. The focus will be mainly on REOs that are transferred from the asset managers back to the market. In Italy we are in certain parts still in a very early stage – especially for small and mid-size banks. The big banks have already sold their big portfolios. But we also expect a lot of follow up transactions now from the big bank portfolios and the securitizations that happened. So there is still a lot to do, not only from the banking side. For Debitos it is the perfect time to expand our activities there to offer our service to the asset managers that for example are in the middle of working out these follow up transactions.
Francesco: There are a lot of assets that still need to be worked out – but I would say that the servicing capacities are already full. In Italy there is certainly a need of more servicing capabilities to be able to handle the current situation. The Italian market offers a great opportunity for secondary markets like Debitos because the infrastructure in servicing is not developed to the degree that it should be. We also see some opportunities from the big banks, because they as well desperately need to focus on their core business and try to find a solution for their NPL exposures on single names small tickets.”
Is the Debitos platform in Italy already seen as a valid tool to sell credit exposures?
Francesco: “Debitos is already well-known in the market – especially because of the Arcade deal. And I think we offer an ideal solution especially for the small and mid-sized banks that do not have the infrastructure to execute the transactions on their own. They simply do not have the reach of Debitos, who has a great track record already on the international market and can offer exposures at very local sellers. The appetite for these types of assets is increasing from international investors because, as Timur mentioned, Spain and other jurisdictions are far more along. In Italy, we have a little bit of a delay. We are right in the middle of a process where the regulators have focused more on NPLs and there are more guidelines for secondary markets. So the products are getting standardized more and more to make the sale of the items on a pan-European market easier. Plus, there is a stronger push at a political and the regulatory level to find a resolution in and for the banks – especially for regional banks that were and are in trouble and need to find investors to sell their NPL exposures.”
What will be Francesco’s role in Debitos?
Timur: “Francesco will follow up the business relations we already have in Italy, he will scale them and also attract new ones. We have a period of six to twelve months where he will mainly be working from Frankfurt. After that, we plan to set up a local office in Italy.”
Francesco: “We want to further develop the platform and also make it well-known especially with the local players in the financial industry like banks, foundations behind banks and small to medium-sized servicers who have this asset class and currently do not know how to manage this asset class on a secondary bidding process. Because, as I have mentioned, most of them don’t have the resources to finance an infrastructure on their own – which can be offered by scale by Debitos. For a number of reasons there is still a lot we have to do. First of all, the resources; secondly, because it is not on top of the agenda of many institutions, especially of the smaller banks. And there is still the language barrier, as Timur knows. Many times, it is also a problem of how to use the platform, how to register and so on. And I will be assisting here as well.”
“Italy is really the only market where NPLs securitizations play such a big role – and the only reason is GACS. – Timur Peters
One of the main talking points in Italy in the last year were the guarantees on securitization of NPLs – GACS.
Francesco: “The main goal of the state guarantees for the securitization of NPLs was to make it easier to sell these portfolios. It was implemented in order to give a way out in a critical moment of the market a few years ago. But I don’t think that the regulators and the political powers will push to increase these guarantees in the future. It has become too risky option for the government, a big liability for the market participants. GACS was expiring in March and the regulations are about to become stricter. But it is safe to say that as of now, GACS portfolios are not in line with the original expectations in terms of business plans recoveries.”
Timur: “Italy is really the only market where NPLs securitizations play such a big role – and the only reason is GACS. Normally investors are rarely interested in this product when there is no state guarantee behind it. Because they cannot see all the risks the securitization might have. And this is by the way one of the reasons why a lot of the investors fear the same difficulties that we had during the financial crisis. That they buy some notes and securitization vehicles where they have no idea what the real value is. The only country where this is actually done is in Italy.”
You have both been attending the NPL Forum in Milan at the end of May and took part in a roundtable concerning the platform model. How did it go?
Timur: “The NPL forum in general and the transaction platform panel went really well. We had representators of the European Commission, the EBA and the European Data Warehouse join the discussion. EY Italy also presented a case study about the sale of the “Arcade Portfolio”. This was very useful to the audience, so they could see that a platform can actually work in Italy. For the regulators it was good to get some feedback from the audience as well on their current work on NPLs and the templates they introduced.”
What feedback did the regulators get?
Timur: “To summarize it, most participants of the NPL Forum in Milan are convinced that the platform model will have a significant impact on the NPL industry. And the audience seemed to be a big fan of standardization as well. But most participants were not aware what the strategy of the Commission concerning NPLs is. And almost no one was aware that the EBA had already issued standardized templates for the sale of NPLs. It was two out of 80 people that knew about the templates – I believe the EBA still has some communicating to do.”
What will be the next steps – for Debitos and the Italian market in general?
Francesco: “On the general market, we will see lots more secondary activities. For Debitos this will represent an opportunity to increase the traffic on the platform – also when it comes to smaller ticket sizes. We want to prove that this concept can also work on different types of portfolios and asset classes.”
Timur: “We want to extend our market coverage in Italy. And the goal is that next year, every bank and any loan servicer knows our credit marketplace and what it can provide. To achieve that, we really need to work on our branding and the market awareness. On the other side, we want to improve our investor coverage in Italy. We have a very global community on our platform that is already investing there. But we are continuously working on having the right investor for the right asset class or product – even if it is a niche market. And some successful transactions would be nice as well, of course.”
Francesco and Timur – thank you very much for your time.