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More Than 70 Investment Funds Bid for Bad Bank´s Assets

Representatives of more than 70 banks and investment funds from all over the world attended a meeting aimed at potential purchasers of Sareb´s assets. The reunion was organized by a law office Ashurst in London at the end of November. About 150 participants showed “strong” interest in the company´s wide offer (nearly  200.000 benchmarks valued at 50.781 millon Euros), bidding for the shares, especially the mortgage loans. Nevertheless, some of them expressed certain concern about the negotiating process with the firm and demanded a “flexible” regulatory framework, according to the sources from Ashurst.

The meeting has taken place at the moment when many great investors, like Cerberus, Apollo, Centerridge, Varde, Goldman Sachs, Deutsche Bank or Morgan Stanley turn their eyes to Spain. The investors consider Sareb´s portfolio “a good business” at “reasonable prices”. Commentators highlight that the participants are interested mainly in mortgage loans, which render 78% of the total balance of the bad bank.

(…) Both the assets and the mortgages will be available on the market since January 1st, 2014.

Some investors who had negotiated with Sareb before, called company´s startup portfolios “unclear”, somewhat “insecure” and demanded more “maturity” in procedures and “certainty” while composing asset groups and in the bidding processes.

(…) As the investors say, “youth” of the firm and “learning curve process” in assets sales might be to blame for some failures within its service. Belén Romana defends Sareb by pointing out that it has managed to build a company structure “in record time”, valuate the assests of its two main assignors (Bankia and CatalunyaCaixa), capitalize the bad bank and start asset sales, among other activities.

The participants at the meeting of Ashurst raised a specific question of mortgage loans subordination in Sareb´s balance. (…) They wanted to know whether the buyer, as a new creditor, will be considered a person with “special” relationship with the assignor and whether by entering in an arrangment with creditors one would become a subordinate and would be the last to receive.

The Government changed the Restructuring Act and the Credit Institutions Resolution in March, precisely the Chapter 36, which states as follows: “The credits transferred to Sareb will not be qualified as subordinate within the framework of possible debtor´s insolvency, yet when the bad bank would be a shareholder of the debtor company”. That is to say, the law protects Sareb in case of bancruptcy, but does not mention future purchasers.

(…) Due to this uncertainty, the President re-wrote the regulations in order to apply the previous rule to “those who acquire loans from Sareb”. This way the asset buyers obtained a guarantee of being protected as well, and that they will be the first to receive in case of bancruptcy.

FISCAL FRAMEWORK BENEFIT

After the Government applied the regulation reform at the end of June, Sareb is regarded “a credit entity” from the effects of the Corporate Tax Act, which allows it to deduce all its financial expenses deriving from its activity. The interests and commissions transferred to the bad bank will not be withhold and the sales of land and buildings listed in Sareb´s balance will not be included in calculating the share of the company´s Tax on Business Capital. Moreover, the mortgages  formalized to buy the bad bank´s assets will not pay the Property Transfer and Certified Legal Documents Tax.

 

Source: La Razón