The consortium of banks arranging an immensely tricky deal for Inps, the Italian state pensions agency, may be forced to rely on a partial government guarantee to get the deal done, according to sources close to the deal.

The transaction which is now expected to be worth Lit8 trillion ($4.35 billion) and should hit the market later this month or in November is part of the Italian government's efforts to collect delinquent pension contributions, often owed by small businesses and individuals. The sources expect that the deal will have a hugely over-collateralized triple-A rated senior tranche and possibly a first loss piece guaranteed by the government. A mechanism for a full or partial government guarantee was included in legislation that enabled the transaction.

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