• Transaction / Assets
    €750M RE portfolio
  • Seller
    Liberbank
  • Buyer
    Bain
  • € MM
    45%-48%

Liberbank Agrees To Sell €750M RE Portfolio To Bain

11 October 2017 – El Confidencial

Liberbank has agreed to sell a portfolio of foreclosed properties worth €750 million to the fund Bain Capital, after ruling out a rival offer from KKR. According to sources familiar with the situation, the transaction will be closed at a price of between 45% and 48% of the initial value (the final figure is the only matter that still needs to be agreed), in other words, with a discount of between 52% and 55% of the book value. That haircut is lower than the 66% that Santander had to apply to divest Popular’s property portfolio in the summer.

The aforementioned sources explain that, in the end, this portfolio does not include any non-performing loans, but rather contains foreclosed assets only. The sales price implies a higher discount than the net value (after provisions) at which Liberbank recognises these assets on its balance sheet (around 40%, albeit based on their appraisal value as at 2017), which means that the entity will have to recognise an additional loss as a result of this sale. But it will cover some of that loss with funds resulting from the €500 million capital increase that it approved on Monday and to which its main shareholders have already signed up.

The fact that Liberbank has had to offer a lower discount than Santander did for the sale of Popular’s assets is explained by three factors. Firstly, the size and urgency of the operation: the bank chaired by Ana Botín sold a much larger portfolio, amounting to €30,000 million, which it wanted to divest from its balance sheet as soon as possible, and whereby shield itself from the possible legal annulment of its purchase of Popular.

The second is that Santander sold only 51% of its portfolio, in other words, in that case, the bank will continue to receive income from the rental or sale of the assets in its remaining 49% stake. A better price can always be negotiated when the buyer acquires the rights to all of the revenues associated with a given portfolio. The third reason is that “not all of the assets are the same, and Popular’s portfolio contained a lot of poor quality properties”, according to one of the sources consulted. In other words, Liberbank’s portfolio contains better quality assets.

Ensuring survival on its own

(…). As El Confidencial has reported, both this real estate operation, as well as the capital increase, are consequences of demands made by the (Spanish) Government and the Bank of Spain to strengthen Liberbank’s solvency for fear of a repeat of a collapse like Popular’s (a fear that also led to the supervisor imposing a ban on the short selling of the entity’s shares, which still continues). In the face of interest from Abanca, Unicaja and CaixaBank to acquire Liberbank, the entity led by Manuel Menéndez decided to undertake these operations to ensure its survival as an independent player.

Moreover, the entity sold another €215 million in real estate assets unrelated to this portfolio during the third quarter. In that case, it sold the assets at their net book value, in other words, without the need to record any additional losses. In this way, Liberbank will easily exceed its objective of decreasing its property portfolio by €800 million this year, with most of the fourth quarter still remaining. In addition, during the same period, it decreased its non-performing loans by a further €230 million thanks to recoveries and foreclosures.

Original story: El Confidencial (by Eduardo Segovia)

Translation: Carmel Drake

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