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Sareb Analyses Goldman’s Report on the Sale of €20Bn of its Property

6 July 2018 – Voz Pópuli

One of the discussion points at the most recent meeting of Sareb’s Board of Directors, which took place this week, was Operation Alpha. The deal involves the sale of assets – non-performing loans, to be specific – with a gross value of around €20 billion (initially they were valued at €30 billion). This is the largest operation to be considered by the semi-public body since its creation, in 2012, and for this end, it has engaged Goldman Sachs.

The large international investment funds, such as Cerberus and Blackstone, are waiting for Sareb to decide whether to divest the portfolio before they put offers amounting to several billions of euros on the table. But the company in which the Frob holds stake, with almost 46% of its share capital, is taking its time.

According to sources close to the company chaired by Jaime Echegoyen, at that most recent meeting of Sareb’s board, Goldman Sachs reported on the progress of the report that it is preparing about Operation Alpha, which the Spanish entity will analyse when it comes to deciding whether to go ahead with the sale or not. When the US investment bank has finalised its report, Sareb’s Board of Directors will take a decision in this regard. “Goldman Sachs is still working on the report (…)”, they say.

“For Sareb”, explain the sources consulted, “the operation will generate losses regardless; the assets are over-valued, overpaid, and will definitely have to be sold at a discount”. Sareb is very aware that the moment “is ripe for a sale of this kind, given the appetite shown by the large investment funds”, but Operation Alpha may mean that the semi-public company will have to recognise such large losses that its own viability could be jeopardised.

For these reasons, Goldman Sachs is likely to suggest alternatives to carrying out the sale. One possibility, amongst others, is that Sareb could continue as a shareholder of the sold portfolio and that the fund that acquires the portfolio also takes responsibility for formalising the platform through which the assets will be sold or managed, in other words, the servicer. The sources consulted cite the sale of Popular’s real estate assets to Santander and Blackstone by way of example.

The assets in Operation Alpha basically correspond to the portfolio of non-performing loans whose management was granted by Sareb to Haya Real Estate, owned by the fund Cerberus, in 2014. That management contract is due to terminate in December 2019, and Sareb may organise a new tender or choose to renew it.

For Cerberus, it is key that Haya Real Estate renews its position as the manager of these assets ahead of the platform’s stock market debut, which the fund has delayed until the end of this year or the beginning of 2019; moreover, Cerberus may grow the portfolio managed by Haya if it manages to acquire Operation Alpha, and whereby debut a larger company on the stock market.

Sources close to the investment funds and Spanish banks consider that Sareb has suspended all of its major sales operations, including Alpha, due to the recent change of Government. “Operation Alpha may or may not go ahead, but the decision in that regard will be taken on the basis of the conclusions drawn by the Goldman Sachs report and upon the votes taken by the Board of Directors”, say sources close to Sareb.

Audit and public property

Although from the outside, Sareb is trying to remain completely calm in the face of the change in Government, sources close to the body, as well as others linked to the banks and investment funds, agree that, right now, there is concern about the possibility that a hasty political decision would complicate the work performed to date (…).

The party led by Pedro Sánchez has proposed carrying out an audit of Sareb. According to the sources consulted, that doesn’t make much sense when all of the focus possible has already been placed on the entity. The special shareholder composition of Sareb and the public interest associated with its activity mean that it is subject to supervision and analysis by the Bank of Spain, the Spanish National Securities and Market Commission and the European Central Bank, amongst others (…).

Original story: Voz Pópuli (by Alberto Ortín)

Translation: Carmel Drake