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Inside the race for Italy's NPLs

International investors are scrambling to establish themselves as the country’s huge NPL market finally starts to creak open. But this is not a market for the faint-hearted, and achieving those double-digit rates of return will require skill and unrivalled local knowledge.

Italy Siena horserace

The distressed debt market in Europe was buzzing at the end of September over the sale of a jumbo €4.2 billion portfolio of European nonperforming loans. This was no UK, Spanish or Irish deal. This time the loans that up to seven large international credit specialists are said to be fighting over were originated in Italy, the home of 10 year-plus recovery proceedings, elusive documentation and protracted and often chaotic loan auctions.

What is happening? Has the endless search for yield led international buyers simply to ignore the perils of dealing in a jurisdiction notorious for its insolvency quagmire? Or is Italy really set to be the new darling of the NPL market, ripe with opportunity and returns that have disappeared from those other, more established, markets?

“I have seen as much interest in Italy this year as I have in the last three years,” Richard Thompson, partner in the portfolio advisory group at PwC in London, tells Euromoney. ““In the eyes of many investors Spain has become relatively more expensive and Italy offers better potential. But there is a need to get in now.

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