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KKR Wins Public Tender for Novo Banco’s €1.75-Billion Loan Portfolio

16 December 2018

Novo Banco chose the KKR fund, together with Hipoges and LX Partners, according to the Jornal Econômico. The consortium’s price was a decisive factor in the choice. LX Partners will take on the unsecured consumer debt in the portfolio.

The consortium consisting of KKR, Hipoges and LX Partners, won the tender launched by Novo Banco for the sale of a 1.75 billion euro portfolio of non-performing loans (NPLs), called “Project Nata”, the Jornal Econômico has learned. The deadline for bidding ended Friday.

Novo Banco chose the KKR fund, was bid together with Hipoges and LX Partners, because, according to sources, the price was the decisive factor in the choice. LX Partners will hold onto the unsecured consumer debt in the portfolio.

The sale constituted the largest, single sale of debt ever in Portugal, in a record-setting year for debt sales.

Alantra advised on the transaction.

The three institutions that reached the final stage of the bidding, where they had to submit binding proposals to acquire the portfolio of bad debts, were Deutsche Bank, which led a consortium with CarVal Investors and Arrow Global (which owns Whitestar); and Cerberus Capital Management, together with Nuno Espírito Santo Silva’s Finsolutia. According to our sources, Cerberus pulled out of the running after having delivered its sealed bid.

The transaction will now be submitted to a new process of due diligence, to be carried out by Novo Banco and Alantra.

The portfolio consists of a 550 million euros worth of unrecovered corporate debt, belonging to 54 major companies and another €1.2 billion in non-performing loans granted to 62,600 smaller retail and business creditors.

In its latest quarterly earnings release, Novo Banco announced that its non-performing loans fell by 380 basis points to a ratio of 27.7%, or 1.6 billion euros. However, “the bank will sell a portfolio of 1.7 billion euros of NPL credit by the end of the year, doubling our debt reduction by the end of the year,” the CEO of the bank said at the time to the to the Jornal Econômico.

The stock of non-performing loans decreased from €10.1 billion in September 2017 to €8.5 billion in September 2018 (a reduction of 1.6 billion euros).

“The ratio of NPLs (non-performing loans) stood at 27.7% (-3.8 percentage points compared to September 2017) due to the continued reduction in non-performing loans, with a coverage ratio of 63.5% (+11.6% over the same period last year),” the earnings release states.

The reduction in credit to companies (-€1.59 billion euros) “had a special impact on non-performing loans (-€1.6 billion),” he told the bank. At September 30, 2018, corporate loans fell -7.7% year-on-year, representing 62.5% of loans to companies in the total portfolio.

Original Story: Jornal Econômico – Maria Teixeira Alves

Translation: Richard Turner