Banks Sell Offices & Premises of Defaulting Companies to Funds

5/05/2014 – ExpansionPro

Spanish banks gear the sales of real-estate-owned assets up. They have transferred around €1.5 billion in non-performing loans lent to SMEs and big companies backed by premises, offices and industrial to distressed or vulture funds. Discounts in this kind of sales oscilate between 50% and 90% of the assets nominal value.

Over the past months, several transactions involving REO property have been closed. For instance, Bankia sold the “India 6” portfolio at the end of February for €713 million to Elliot, Oaktree and Savia Asset Management, while Catalunya Banc shed real estate inside the “Cava” project acquired by Aiqon Capital. Other entities such as CaixaBank (“Flanders Project“) have the process ongoing.

According to Deloitte, the portfolios are called “mixed” as they include non-performing loans of SMEs both without any collateral for which the funds demand up to 95% discount and the credits backed by property suggesting price slashes of between 50% and 90% of their nominal value.

In great majority of cases, the bankrupt companies whose debt is found inside the portfolios have got a maximum turnover of €30 million and many of them are in insolvency process.

Until last year, loan portfolios on sale contained only consumer credits, provisioned in 100% and demanding no endowment. However, the REO heap which banks have to face nowadays pushes them towards more dynamic sales.

As illustrates the case of Catalunya Banc´s recent sale of €7 billion lot of soured assets, selling large residential portfolios to institutional investors casts huge challenge for Spanish banks.



Original article: ExpansionPro (by Jorge Zuloaga, Viernes 2 mayo 2014, pp. 13)

Translation: AURA REE