*

Measure stems from criminal probe which does not target

bank

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Prosecutors allege shortfalls in loan approval procedures

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Oaktree, Centerbridge signed binding deal in September

(Adds detail from Banca Progetto statement in paragraphs 2-3,

6-7; on deal in paragraphs 3-4)

By Emilio Parodi

MILAN, Oct 24 (Reuters) - Banca Progetto, a small

Italian bank which investment firm Oaktree recently agreed to

sell to Centerbridge, has been placed under court administration

for allegedly lending money to a person arrested under mafia

charges, a court document showed.

Banca Progetto confirmed in a statement it would work with

court-appointed administrator Donato Maria Pezzuto to ensure its

control system is adequate following a criminal probe in Milan.

The probe doesn't target Banca Progetto but involves 10

loans granted by it, out of a total of 40,000 currently in

place, the bank said.

Oaktree Capital Management, headquartered in Los Angeles,

had first invested in Banca Progetto in 2015. After looking for

years into a possible sale and also exploring a potential market

listing to exit the investment, it struck a binding deal with

Centerbridge Partners in September.

The deal has not closed yet, two people with knowledge of

the matter said. Reuters could not establish how the court

administration could affect it.

Oaktree and Centerbridge had no immediate comment.

"The bank wishes to reassure its clients and stakeholders

that it will continue to operate normally through its internal

bodies and structures," Progetto said.

In recent months Milan judges appointed court administrators

also at two companies which are part of, respectively, the

Armani and LVMH groups amid probes into alleged worker

exploitation at some of their suppliers.

The court appoints a temporary administrator to help a

company fix shortfalls while continuing to operate. Under such

procedure, no charges are laid against the company.

The court administration of a company is a safety measure

with no punitive intent, which was first developed by Milan

magistrates to clean up companies infiltrated by the mafia.

Prosecutors allege Banca Progetto granted the financing,

which was guaranteed by the Italian state, without conducting

the necessary checks on the borrower, the document of which

Reuters obtained a copy showed.

Between 2019 and 2023, Banca Progetto lent 10 million euros

to a number of companies linked to a person who was arrested for

mafia charges in 2023.

"The financing was granted in a superficial and gullible

manner, foregoing basic requirements to screen loan

applications," the document said.

It added the Bank of Italy had conducted an on site audit

between late 2021 and early 2022, fining Banca Progetto for

failures in the vetting of clients who borrowed state-backed

funds.

In Italy small businesses, which are the majority, access

credit mostly through a system of state guarantees and Banca

Progetto specialises in state-guaranteed financing.