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UPDATE 1-Italy's UniCredit, Intesa to set up bad loans vehicle with KKR -FT

(Updates to add KKR's response)

April 21 (Reuters) - Italy's two largest banks, UniCredit and Intesa Sanpaolo, are teaming up with U.S. private equity firm Kohlberg Kravis Roberts to pool some of their bad loans into a vehicle that will provide fresh capital for the struggling companies, the Financial Times reported.

The preliminary agreement, which also involves restructuring adviser Alvarez & Marsal, will be announced on Tuesday, the paper said on its website on Monday.

The announcement is likely to say the four companies have signed a memorandum of understanding but are still working out many details, FT said.

The vehicle could house several billion euros of loans, the paper said.

The two Italian banks are considering how much of their bad loan portfolio to transfer into the vehicle and whether to contribute fresh funds themselves, the FT reported.

KKR declined to comment on the article.

UniCredit, Intesa, and Alvarez & Marsal could not immediately be reached for comment outside regular working hours.

(Reporting by Karen Rebelo in Bangalore; Editing by Richard Chang, Bernard Orr)

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