Private credit heavyweights are circling the riskiest portions of a €1.2bn ($1.4bn) non-performing loan package being sold by Italy's BFF Bank, according to sources cited by Bloomberg. Pimco and Pollen Street Capital are in talks over the junior tranches, with Fortress Investment Group, Davidson Kempner Capital Management, and Cerberus Capital Management also showing interest.

The portfolio bundles the Milan-based lender's oldest non-performing exposures to public-sector entities, long-dated receivables that have become a staple for private credit funds competing for European bank disposals. A sale would likely be struck at a discount to book value but is expected to lift BFF's capital ratios, with an accord anticipated by early November.

The sale is part of a strategic review launched by newly appointed chief executive Giuseppe Sica after the Bank of Italy flagged issues in how BFF classifies credit exposures. Shares have lost more than two-thirds of their value over two years. BFF is weighing options including new investors, asset sales, or a whole-bank transaction, with non-binding proposals due by 10 September. State-owned AMCO has expressed interest in the factoring business, while BPER Banca flagged interest in payments and depositary operations.