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By Lisa Jucca and Massimo Gaia
MILAN (Reuters) - UniCredit (MI:CRDI) has shortlisted Lone Star and a consortium comprising Italy's Prelios and Fortress Investment Group for the sale of its bad-loan management unit, and is expected to pick a bidder by mid-October, five sources with direct knowledge of the situation said.
The sale, which could yield UniCredit around 700-800 million euros, is part of the bank's plan to raise capital and strengthen its balance sheet through asset sales ahead of a Europe-wide bank asset review by the European Central Bank.
The unit, UniCredit Credit Management Bank (UCCMB), manages more than 40 billion euros (31.51 billion pounds) of non-performing loans that belong to both UniCredit - Italy's biggest bank by assets - and to third parties.
In July UCCMB had attracted five offers from specialised investors anticipating a wave of sales of bad loans by Italian banks looking to clean their balance sheet as the euro zone's third biggest economy struggles to emerge from a recession.
The two shortlisted bidders would buy both UCCMB's business operations structure, or "platform", and a bad loan portfolio of between 4-5 billion euros inherited from smaller Italian bank Capitalia that it took over in 2007, the sources said.
The loan portfolio, which is old and of very poor quality, could be valued as little as 10 percent of its book value, meaning up to 500 million euros. The platform could be worth around 300 million euros, one of the sources said.
According to one senior source with direct knowledge of the situation, after the sale UCCMB will continue to manage existing bad loans on UniCredit's books worth up to 8.5 million euros each.
For new deteriorated loans, the threshold is expected to be 1.5 million euros, meaning credit with large clients will be managed by UniCredit directly, the source said.
Private equity fund Lone Star, real-estate company Prelios (MI:PREI) and U.S. investment firm Fortress all declined to comment. UniCredit also declined to comment.
UniCredit Chief Executive Officer Federico Ghizzoni said earlier this year the bank was planning to close the sale by the end of the year.
UniCredit's non-performing loans amounted to nearly 50 billion euros at the end of June. Of these, nearly 37 billion euros had been generated in Italy.
(Additional reporting by Elisa Anzolin in Milan and Freya Berry in London)