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Bain and Waterfall Vie to Acquire Novo Banco’s Bad Debts in Spain

18 December 2018

Last week, the two firms submitted proposals for the €400-million portfolio of bad debts that Novo Banco is selling in Spain.

Bain Capital and Waterfall Asset Management are in the final stretch to buy the 400 million euro portfolio of bad debts that Novo Banco is in the process of selling in Spain and have already submitted their proposals to the bank led by António Ramalho, ECO learned from a market source.

The “Nata” project, the sale of 1.75 billion euros in NPLs (non-performing loans), is nearing its conclusion, won by the American private equity fund KKR, as ECO reported. Novo Banco has now turned its attention to the disposal of another portfolio of problematic loans in Spain, this time known as “Albatross.” Mr Ramalho has already received proposals from Bain and Waterfall, and the conclusion of sale may occur before the end of the year.

It is not Bain’s first foray into the Portuguese market for NPLs. Bain is believed to have been the buyer of a 476-million-euro portfolio of NPLs that Caixa Geral de Depósitos sold last year. Waterfall also recently acquired bad debts from Greece.

ECO contacted Novo Banco, which declined to confirm any details of the operation.

The agreement for the sale of the “Nata” project is expected to be signed by the end of this week. The Americans at KKR won the bidding, after competing with Deutsche Bank and Cerberus over the weekend. KKR will be joined by the servicers Hipoges and LX Partners, who will manage the portfolio. A source close to the process told ECO that KKR had not yet completely closed the financing structure for the operation when the winner was announced.

Both the Nata and Albatross operations are part of a policy of disinvestment that António Ramalho initiated to bring down the balance of bad debts at the bank which is 75% owned the Lone Star fund. Portugal’s Resolution Fund holds the other 25%. Recently, the bank also sold a portfolio of 9,000 properties to the Americans at the Anchorage Capital Group for 716 million euros, after also selling other non-strategic assets, including its insurance business and Véniété in France.

Novo Banco has committed itself to reduce its exposure to bad debts in the coming years, which have caused massive losses. In the year to September, Novo Banco posted losses of 420 million euros due to a loss of almost 160 million euros stemming from the banks’ disposal of its real estate portfolio. This came after losses of €1.4 billion last year, which led the Resolution Fund to inject additional funds into the institution under the Contingent Capital Facility that was created when Novo Banco was sold to the Lone Star.

According to the bank’s latest earnings report, the financial institution held about 8.5 billion euros in NPLs at the end of September of this year, down by 784 million euros since December 2017. This figure corresponded to a non-performing credit ratio of 27.7%. The bank has a coverage ratio of 63.5%.

Original Story: Economia Online – Alberto Teixeira

Translation: Richard Turner