13 June 2016 – Expansión
Project Big Bang paralysed the Spanish financial sector in 2015. At the time, Bankia tried to sell all of its foreclosed assets in a single transaction, including: 38,500 homes, 2,600 plots of land and 5,000 commercial premises, worth €4,800 million. A large number of funds were interested in the sale, but only Cerberus and Oaktree expressed their intention to submit binding offers. The prices and conditions did not match with Bankia’s expections and so it decided to suspend the operation at the end of the year. (…).
With all of those roadblocks, Bankia decided that it would maximise the value of its foreclosed assets by keeping them on the balance sheet and selling them off through the retail channel and in smaller portfolios, such as the case of Project Lane, see below. Even so, sources in the sector expect to see fresh attempts to sell large portfolios of foreclosed assets over the next few months and years, something that more than one entity has planned for 2016. To this end, the markets must improve further and provisions should be adjusted even more to the prices being offered by the funds. The Bank of Spain’s new accounting circular, which comes into force in October, is expected to help in this sense and to accelerate the divestment of the banks’ problem assets.
Now, Bankia is negotiating the sale of a portfolio of homes with three international funds, in an operation known as Project Lane. The entity is being advised by KPMG and is looking to transfer around 2,500 homes worth c. €400 million, according to financial sources.
The operation is in a very advanced phase, with binding offers due to be submitted next week. Bankia and its advisor have selected three funds, which according to the same sources, do not include Cerberus.
Initially, the US fund was the favourite buyer for the operation, on the basis that it knows the assets better than anyone else through Haya Real Estate, the former Bankia Habitat, which manages homes and real estate loans from Bankia. In fact, Cerberus was the fund that was closest to acquiring Big Bang, with an offer of around €2,100 million.
The portfolio of assets on sale as part of Project Lane primarily comprises homes, but also includes industrial and commercial assets, to a lesser extent. It is the largest sale of foreclosed assets that any of the banks have put on the market so far in 2016. Only Cajamar has explored this option in recent months, with Project Omeya – around €72 million -, as it waits to see what will happen during the second half of the year. The 2,500 homes on sale represent around 6% of the total haul that Bankia has on its balance sheet. The entity sold 9,200 properties through its branch network and Haya Real Estate last year. The aim is to try and repeat those figures in 2016.
Since the new management team, led by José Ignacio Goirigolzarri (pictured above), took over at Bankia, the nationalised group has been one of the most active in the sale of portfolios. Last year, it sold more than 80 batches of problem assets, which allowed it to decrease its doubtful debt balance from €20,000 million in 2013 to €12,500 million by March 2016. It has managed to do this thanks to higher provisions.
Original story: Expansión (by J. Zuloaga and S. Arancibia)
Translation: Carmel Drake