On 27 July 2017 Law-Decree No. 99 of 25 June 2017 has been converted into law, which established special rules applicable to the «liquidazione coatta amministrativa» procedure, as well as the sale of the banking business units including assets and liabilities of the two banks, with the financial support by the Italian State. Nctm assisted Bank of Italy, the Ministry of Economy and the Liquidation Commissioners in the sale to Banca Intesa.

The liquidazione coatta insolvency procedure The liquidazione coatta procedure has been ordered based on the consideration that the two banks were declared insolvent or at risk of insolvency by the ECB and that the conditions were lacking to access to resolution procedures according to Legislative Decree No. 180/2015, the Italian law e implementing the BRRD EU Directive.

The peculiarities regarding the liquidazione coatta procedure are limited mainly to the introductory phase, with a Decree by the Ministry of Economy and Finances, which ordered (i) the opening of the procedure, (ii) the authorization to the Liquidation Commissioners to sell the banking businesses and to provisionally run the businesses for the time necessary to the sale, (iii) the financial support by the State with respect to the sale.

As to the unfolding of the procedure, it is provided that (i) the proof of debt phase will be limited to those debts which have not been assigned together with the businesses (which, therefore, are not prejudiced by the procedure and will be fulfilled on an ongoing basis within the relevant contractual relationships having been assigned along with the businesses to Banca Intesa), or to those which may be returned to the procedures, as it is provided in the sale contract, and (ii) the Liquidation Commissioners assign to Società per la Gestione di Attività – SGA S.p.A. the NPLs and other assets which were not transferred along with the businesses to Banca Intesa.

The sale of the banking businesses The whole deal was conditioned by the utmost urgency to ensure the swift continuity of the ordinary business activity of the two banks, on the verge of their declaration of insolvency. This required that the selection of the purchaser be made through an open and competitive procedure, which was run before the Law-Decree entered into force and the liquidazione coatta procedures were started. The sale contract was therefore concluded by an acceptance by the Liquidation Commissioners, upon taking the office, of the proposal made by Banca Intesa, according to the special provisions of the Law-Decree which allowed to proceed immediately, derogating to the provisions of Art. 90 TUB.

With the sale all liabilities arising in the ordinary course of business in the exercise of the businesses of the two banks were transferred to Banca Intesa, except for some of them provided by the Law-Decree and by the contract, which will then need to be considered in the proof of debt phase of the two liquidation procedures: (i) the liabilities subject to bail-in according to Legislative Decree No. 180/2015, (ii) the debts (also for damages or repayment) vis-a-vis the shareholders and bondholders, arising from the placement activity (in part, the relevant claims of individuals, consumers or enterpreneurs, who bought the notes before 12 June 2014, will be eligible for reimbursement by the intra-banking solidarity fund, as provided by Art. 6 of the Law-Decree), (iii) the debts arising from litigation not as yet started on the date of the sale of the businesses, but arising from facts occurred earlier, (iv) the liabilities for fines and sanctions.

As to the assets having been transferred with the businesses, it can be noted that these are in general the ordinary and current assets of the banks, including among others (i) derivative finance contracts not being of a speculative nature, (ii) ongoing performing receivables, (iii) receivables at risk up to a maximum overall amount, allowing however Banca Intesa to return those under certain conditions, as it is provided also by Art. 4 of the Law-Decree, (iv) real estate property, including those owned by the banks under leasing contracts, (v) leasing contracts, credit card and POS services contracts, (vi) lease of premises contracts, utilities and software license contracts, (vii) employment contracts. The transferred assets do not include, among others, receivables classed as NPLs.

The financial support of the State to the sale The sale of the business units to Banca Intesa including the liabilities of the two banks was possible only based on the financial support of the State, as provided by Art. 6 of the Law-Decree.

In particular, the State paid in euro 4.8 billion in cash and provided a guarantee for the loans made to cover the unbalance of the sale, for an amount variable between euro 5.3 and 6.3 billion. This is most relevant with respect to the chances of repayment of creditors admitted to the liquidazione coatta procedure: indeed, the Law-Decree provides that the relevant receivable of the State for repayment will be satisfied with a priority immediately subsequent to the super-priority claims and, as a consequence, will most likely exclude that any amount is left for payment of any other secured or privileged creditor, let alone of unsecured creditors.

Pending litigation The effects of the opening of the procedure and of the sale of the businesses on pending litigation differ:

  1. lawsuits having as a subject matter rights and receivables of the two banks, which can therefore be continued against third-party debtors by the Liquidation Commissioners, are subject to interruption (this means that they are temporarily stayed and each of the parties has then an option to restart the proceeding within a three-month term). Interruption should be automatic by operation of law, similar to what happens in bankruptcy liquidation according to Art. 43 IBL (there is room for uncertainty, due to the fact that this rule is not recalled by TUB nor by Art. 200 IBL applicable to liquidazione coatta as a general rule). Interruption should therefore apply also to lawsuits having as a subject matter rights or receivables assigned to Banca Intesa, considering that interruption is triggered by the opening of the procedure and that happened before the sale to Banca Intesa was concluded;
  2. lawsuits having as a subject matter debts of the banks, non assigned to Banca Intesa, cannot proceed further, according to A 83, third para., TUB due to the fact that these are debts to be considered in the proof of debt phase of the liquidazione coatta procedures;
  3. lawsuits having instead as a subject matter debts of the banks, having been assigned to Banca Intesa (excluded therefore from the proof of debt of the liquidazione coatta procedures), should continue between the original parties, according to Art. 111 of the Italian Civil Procedure Code: however, as a consequence of the statutory bodies of the two banks having lost their title to represent the banks in Court, these lawsuits will be subject to interruption as indicated under a) above.

It should be recalled that all disputed claims, not having been lodged with a lawsuit started before the opening of the of the liquidazione coatta procedures, are excluded from the assignment to Banca Intesa and can therefore be enforced only within the proof of debt phase of the of the liquidazione coatta procedures.