Oaktree Capital Management Sells Banca Progetto to Centerbridge Partners

Oaktree Capital Management has announced the sale of Banca Progetto, an Italian specialty finance bank, to Centerbridge Partners, enhancing its investment strategy.

In a significant development within the Italian financial landscape, Oaktree Capital Management, a prominent investment firm, has announced the sale of Banca Progetto, an Italian specialty finance bank, to funds managed by Centerbridge Partners, a well-known private equity firm. This transaction, confirmed in a statement released on Wednesday, marks a pivotal moment for both firms and the broader banking sector in Italy.

A Brief History of Banca Progetto

Oaktree Capital Management first ventured into the Italian banking sector in 2015, acquiring a stake in Banca Progetto when it was still operating under the name Banca Popolare Lecchese. At that time, the bank's loan portfolio was modest, amounting to just 50 million euros (approximately $55 million). Fast forward to the end of 2023, and Banca Progetto has experienced remarkable growth, boasting a loan book that has surged to 7.6 billion euros.

This impressive expansion can be attributed to the bank's strategic focus on lending to small- and mid-sized Italian businesses. In recent years, Banca Progetto has capitalized on state-backed loans, which have become increasingly popular among borrowers. By the end of 2023, these state-guaranteed loans accounted for a staggering 6.9 billion euros of the bank's total lending portfolio.

Oaktree's Strategic Exit

Oaktree Capital Management has been contemplating an exit strategy for its investment in Banca Progetto for the past three years. The firm has explored various avenues, including the possibility of a stock market listing, as it sought to liquidate its stake in the bank. The decision to sell to Centerbridge Partners reflects Oaktree's commitment to maximizing its returns while navigating the evolving financial landscape.

In the previous fiscal year, Banca Progetto reported a net profit of 72 million euros (around $79.6 million), showcasing its robust financial performance. The bank's return on equity (ROE) stood at an impressive 28%, significantly higher than the average ROE of 12.3% for Italian banks in 2023, excluding extraordinary items. This strong performance has positioned Banca Progetto favorably in the eyes of potential investors.

The Financial Details of the Sale

While Banca Progetto has not disclosed the exact financial terms of the sale, it is reported that the bank was valued at a premium to its book value, which is estimated to be nearly 300 million euros. According to sources familiar with the transaction, the final sale price exceeded 500 million euros. This valuation underscores the growing confidence in the Italian banking sector, particularly for institutions like Banca Progetto that have demonstrated resilience and profitability.

Morgan Stanley acted as the financial adviser to Oaktree Capital Management during this transaction, while Kitra Advisory and JPMorgan provided advisory services to Centerbridge Partners. The involvement of these reputable financial institutions highlights the significance of the deal and the strategic interests at play.

The Impact of Higher Interest Rates

The recent surge in interest rates has had a profound impact on the profitability of Italian lenders. Over the past two years, higher interest rates have allowed banks to close the substantial discount to book value at which their shares were previously trading. This shift has created a more favorable environment for financial institutions, enabling them to enhance their earnings and attract investment.

Banca Progetto's above-average ROE has positioned it as an attractive investment opportunity, particularly in a market where investors are increasingly discerning. The bank's ability to maintain strong profitability in a challenging economic climate speaks volumes about its operational efficiency and strategic direction.

Centerbridge Partners: A Strategic Acquirer

Centerbridge Partners, which manages approximately $38 billion in capital across private equity, private credit, and real estate sectors, has a history of investing in the Italian financial market. The firm's previous acquisition of a stake in BFF, another specialty finance bank, demonstrates its commitment to expanding its footprint in this sector.

The acquisition of Banca Progetto aligns with Centerbridge's strategy of identifying and investing in high-potential financial institutions. By leveraging its expertise and resources, Centerbridge aims to further enhance Banca Progetto's growth trajectory and solidify its position in the Italian banking landscape.

The sale of Banca Progetto by Oaktree Capital Management to Centerbridge Partners marks a significant milestone in the evolution of the Italian banking sector. With a remarkable growth trajectory, a strong focus on small- and mid-sized businesses, and a commitment to state-backed lending, Banca Progetto is well-positioned for continued success under its new ownership. As the financial landscape continues to evolve, this transaction underscores the potential for growth and investment in the Italian specialty finance market.