Maurizio suggests that the inefficient firms must fail and make room for new

business according to Darwin. .

Hypothesis: Asteroid Impact
The Crises is and was an asteroid impact which collided with the global banking
system. According to economists, regulators and politicians, this event nearly
caused the extinction of the banking system as we knew it. The economic asteroid
came quickly and the impact has spelled the cataclysmic end to many businesses,
causing a systemic meltdown in the free function of the economy.
For almost 8 years, dense macroeconomic clouds of dust blocked the sun's rays,
darkening and chilling Earth to deadly levels for financial institutions, governments
and investors. When the dust finally settled, The clouds lifted in only certain parts
of the world; green shoots have begun to sprout. Italy still waits for it to rain.
Italian companies and banks alike are experiencing the Darwin effects of evolution.
It is widely agreed that the banking system in Italy must shed its skin, leave its pre
crises fossils in the soil, and evolve. .
Cataclysm accelerates evolution:
According to Darwin, cataclysmic events are the seeds to evolution. The first
shoots have peeked out of the soil in the form of Alante and Alante 2. The plan for
BMPS recapitalisation is incredibly complex, fraught with politics and riddled with
uncertainty. So much so that investors and Italians alike remain unconvinced that it
will succeed. If it does it would amount to a jumbo NPL trade which could act as a
catalyst for subsequent trades.
Fossil Record
A gradual decline in the old lending and banking models is emerging as Italy grows
wings and a tail. The IPO plans and last minute bailout of Veneto and Vicenza bailouts by Alante are an example. Alante 2 is a different model than Vicenza and
Veneto. The investors have learned from that experience and have changed the
model in Alante 2. I expect more complex trades like this going forward. I expect
partnerships like this to become the norm. I do not expect volumes of sales to
investors to increase until the evolutionary process is in full swing. This is a
multiphase process mirroring evolution. In the past quarter, momentum has picked
up and interest in the Italian market has increased significantly. There is
considerable capital to deploy.
The quality of the trades is still an issue. Many investors are sceptical over country
risk. Similar scepticism on expected returns exists. The expectation of high double
teen digit returns keeps some investors out of the market when in fact, high yield
and distressed funds have underperformed and under delivered expected returns
this year. A portion of the investors I speak with do not like Italian country risk. The
Renzi referendum, coming in October, coupled with lacklustre macro-economic
growth factor risk into investment decisions. The political climate in Italy and Brexit

is causing major obstacles to closing trades. At the transaction level, one

significant problem has been that loan portfolios are unorganised into suitable
asset type and loan buckets to align with investor appetite. It is largely a
disorganised mess which requires many man hours to structure.
I expect that deals like Alante are the first of a new species. These new models
evidence the gradual extinction of old models, replacing them with increasing
innovative lending solutions, to healthy companies. This is good for Italy and for
the Europe.