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Sabadell Puts €250m NPL Portfolio Up For Sale

29 January 2015 – Expansión

Opportunistic funds / “Project Cadi” includes non-performing loans that the entity once granted to real estate developers

Banco Sabadell is making progress in its strategy to reduce the volume of foreclosed assets and bad debt on its books. The financial group led by Josep Oliu, which today releases its results for 2014, has just put an NPL portfolio worth €250 million up for sale.

According to market sources, the so-called Project Cadi includes non-performing loans that were once granted to real estate developers. Through Solvia, Sabadell is taking a very active role in packaging these types of loans, in the face of strong buyer interest from opportunistic funds that are now active in the Spanish market. At the beginning of the month, the bank already disposed of another portfolio worth €435 million (Project Tritón), which included 630 non-performing loans to small- and medium-sized developers, as well as 700 foreclosed assets in Valencia, Andalucía, Cataluña and the Balearic Islands. This sale was put together through a bond issue, acquired by Deutsche Bank and Hipoges. Sabadell may already be sounding out the market with a view to selling other portfolios over the next few months.

This type of transaction reflects the confidence that funds have in the recovery of the real estate market in Spain. In parallel, banks are interested in this kind of transaction because they lighten their balance sheets and allow them to generate income from assets that are no longer productive and that have already been provisioned. According to sector sources, these transactions are closed with discounts of around 75%, which means that the funds are paying the financial institutions 25% of the nominal value of the loans.

The largest transaction of this kind in Spain was closed in 2014 by Blackstone, which acquired a €6,392 million mortgage portfolio from Catalunya Banc. Lone Star and JP Morgan also bought loans from Eurohypo amounting to €4,500 million. Other funds that have acquired portfolios include Aiqon, Lindorff, Cerberus and Starwood.

Original story: Expansión (by S. Saborit and J. Zuloaga)

Translation: Carmel Drake