18/07/2014 – Expansion
The moment of truth for the auction of Catalunya Banc is approaching. Today, the Fund for Orderly Banking Restructuring, known as the Frob in Spain, expects at least four binding offers for the nationalized entity. This Fund and Spain´s Deposit Guarantee Fund (FGD by its acronym in Spanish) hold together 98% of the Catalonian bank.
The public Fund will grant new State guarantees for the purchase but any type of the Asset Protection Scheme is ruled out.
In the sector, it is thought that Santander and CaixaBank will bid the highest, next to Societe Generale and BBVA that will also take part in the auction.
Once the bids laid on the Frob´s table, the Fund will examine them and make the decision on Monday or Tuesday. Unless the best bid hits €200 million and is by 50% higher than the second, the second round will take place two days later and the final winner would be known at the end of the next week.
The Frob estimates that the new guarantees provided for the buyer will be very similar to the ones at the sale of NCG Banco. They had a €1 billion cap and were expected to bring an over €270 loss.
The potential purchaser of Catalunya Banc may ask for a risk coverage, involving legal costs invoked by swaps, minimum clauses and prime rates, as well as early termination of agreement with insurance banks.
Catalunya Banc had previously received a €12 billion bail-out which pushed it into nationalization. The guarantees are also ought to be added to the €572 million support the Frob gave to the sale of distressed mortgages to Blackstone. The Fund hopes to recover the amount, although the “Hercules” will pull the equity from it when it starts to fall into damage.
The transaction is said to be “magnificent” as without its success, Catalunya Banc could have faced liquidation from the part of Brussels, if the bidders asked for more public aids. “There was a certain risk”, sources from the Fund say, “but now we expect to obtain a good price”.
Moreover, the same sources assure that after shedding the toxic assets, Catalunya Banc represents “a sector average” in terms of equity, liquidity and health. “The entity´s attractiveness upsurged right before the auction”.
Original article: Expansión (by Jorge Zuloaga)
Translation: AURA REE