(Bloomberg) — Centerbridge Partners LP is seeking to terminate a deal to buy an Italian lender from Oaktree Capital Management LP signed shortly before the bank plunged into a crisis over allegations it lent to companies associated with the mafia.
Red UK Holdco Ltd., an entity affiliated with Centerbridge, asked a London judge to declare it’s entitled to terminate the agreement to buy Oaktree’s Banca Progetto SpA “with immediate effect,” according to court documents dated March 5. In the filing, Centerbridge said the conditions for the deal weren’t met because the bank failed to address deficiencies related to anti-money laundering controls before the September signing.
A little more than a month after deal was reached, a Milan court put Banca Progetto under judicial administration at the request of Italy’s anti-mafia authority. The bank allegedly provided loans backed by state guarantees to companies indirectly managed by people linked to the ‘ndrangheta, the nation’s most prominent mafia organization.
Centerbridge claimed that’s proof of the breach of the terms of the deal, according to the lawsuit.
Oaktree bought the bank that would become Banca Progetto a decade ago. The firm’s loan book was tiny at the time, amounting to just €50 million ($54 million), but it surged rapidly during the Covid pandemic as the bank set out to benefit from the Italian government’s support for domestic businesses. By the end of 2023, loans had climbed to €7.6 billion, according to the September sales statement.
According to Centerbridge’s lawsuit, Banca Progetto risked failing to prevent “offences of defrauding the State”. The investment firm also cites the bank’s internal audit report mentioning “organisational deficiencies” in Banca Progetto’s credit processes and anti-money laundering.
Representatives for Banca Progetto and Oaktree declined to comment. Spokespeople for Centerbridge didn’t immediately respond to requests for comment.
Following the Milan court order, Bank of Italy started an investigation that led to a special administration procedure on March 21, according to a statement on Banca Progetto’s website. The measure, which removed the bank’s board, could lead to a restructuring or to a winding up of the bank.
Regulators adopted an “early intervention measure” aimed at “ensuring adequate supervision” as well as “restoring conditions of sound and prudent management,” Banca Progetto said in the statement.
–With assistance from Alberto Brambilla.
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