D.E. Shaw Buys €700 Million Of Company Bad Debts From CaixaBank

12/08/2014 – Expansión

The investment fund acquires a portfolio of loans to business which are in administration, many businesses of Cívica Bank. D. E. Shaw has more than 400 employees in Spain.

D. E. Shaw, the opportunist investment fund of David E. Shaw, is doing business with CaixaBank once again. The North American multi-millionaire, former advisor to Bill Clinton and Barack Obama, has acquired through his investment fund a portfolio from the Catalan entity of €700 million in large company defaulted loans, some of which are secured by property, according to financial sources consulted by EXPANSIÓN.

This sale is part of the project known as Project Valonia, the latest large divestment of unpaid loans by CaixaBank. Initially this transaction involved loans for a value of €1.050 million, but finally the Catalan group has decided to not assign part of the portfolio. According to sources close to the negotiation, this change of pace has been due to a lack of agreement on the price.

Investment funds normally acquire these portfolios for prices of around 4% of the nominal value of the loans – which would put the CaixaBank sale at around €30 million – but the figure can be multiplied by up to 20-30% if the loans have property security.

Of the loans sold by CaixaBank more than half are those of companies in administration and which began to stop paying their debts between 2009 and 2010. More than 50% of the portfolio is situated in Andalusia – where Cívica Bank had a large presence – and in Madrid.

D. E. Shaw was already the winner of the last auction of loans by CaixaBank in 2014, Project Flandes. The group presided by Isidro Fainé transferred 1.000 million euros in unpaid loans from SMEs to Perry Capital and Savia Asset Management, and another €70 million to Shaw, which were secured by assets such as offices, warehouses and commercial properties.

An escape route 

This type of transaction allows the banking sector to obtain profits from a part of its portfolio which is totally provided for, and to focus the efforts of the recovery team on loans which have better chances of getting up to date on repayments. Furthermore, in the case of loans with property guarantees, it avoids making the list of foreclosed assets even longer.

CaixaBank is not the only bank following this strategy. The bulk of the sector is making the most of the emerging interest of foreign investment funds in this market in order to get rid of the most problematic assets. For example, BBVA has just put on sale the largest portfolio of defaulted debts.

The purchase of loans from CaixaBank stregthens D. E. Shaw’s strategy in Spain, following the recent acquisition of Multigestión, a debt recovery business with more than 400 employees, from GFKL.

This fund is one of the most active in the Iberian Peninsula in recent months. In fact, it purchased a 2,7% share of the bank Banco Espírito Santo (BES) barely a week before the bail out.

Original article: Expansión (by J. Zuloaga)
Translation: Aura REE