Italy-based banks, UniCredit and Intesa Sanpaolo have entered into a preliminary agreement with Kohlberg Kravis Roberts (KKR) and Alvarez & Marsal to pool bad loans into a vehicle that will provide fresh capital for the struggling companies.
The move comes as private equity houses and hedge funds are seeking opportunities to grab assets from capital-starved lenders, reported Financial Times.
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The publication reported that the four groups have signed a memorandum of understanding but are still working out many of the details.
In addition, UniCredit and Intesa are considering whether to transfer their bad loan portfolio into the vehicle or to contribute fresh funds themselves.
The vehicle could house several billion euros of loans, Financial Times said.
UniCredit and Intesa could not be reached for comment, while Alvarez & Marsal and KKR declined to comment.
