30 October 2017 – Expansión
Liberbank has learned the lesson that Santander taught the market a few months ago when it teamed up with Blackstone to divest almost all of the damaged real estate risk that Popular had held. The bank led by Manuel Menéndez has now also joined the trend of selling most of the capital of a new company, but retaining a stake in it so as to benefit from the future recovery in real estate prices.
The entity, which has just launched a capital increase amounting to €500 million, has also announced that it has created a company using real estate assets that have a book value of €602 million; Bain Capital will own the majority stake (80%), and the remaining 20% will be shared between the bank itself, with a 9.9% stake, and Oceanwood, with a 10.1% stake. Oceanwood is an investment fund that is the largest individual shareholder in Liberbank, with a stake of just over 12%, after the stakes held by banking foundations that gave rise to the entity.
The European supervisory authorities and the main international investment funds are putting pressure on the European banks to divest their toxic assets as soon as possible in order to recover the profitability lost in recent years, having overcome the worst of the financial crisis (…).
When Santander purchased Popular for €1, the first decision that it made public was that of putting all of Popular’s problematic real estate assets up for sale.
To that end, it decided to increase the coverage ratio of those assets to more than 60%, charging it against Popular’s reserves, to allow it to find a buyer more easily. In the end, it decided to accept Blackstone’s offer, which valued the entire real estate portfolio at €10,000 million and which saw the investment fund acquire 51% of the new company and Santander hold onto the remaining 49%. For Santander, the operation was attractive because it allowed it to immediately recover €5,100 million, it removed Popular’s real estate risk from the balance sheet and it left the door open for the entity to recover more money in the future to the extent that Blackstone proceeds to sell the new company’s assets.
Liberbank has done the same, although in a smaller proportion. In its case, the volume of assets is substantially smaller, €602 million compared to €30,000 million in Popular’s portfolio; moreover, its share of the new real estate company is also much smaller; it will be left with a 9.9% stake, whilst Santander owns 49% of its company.
But the result is similar. Liberbank is removing a very significant percentage of the damaged real estate risk from its balance sheet by the same means as Santander did. Raising the coverage ratio of these assets to a sufficient percentage so that an investment fund like Bain Capital Credit, and also Oceanwood, are willing to invest a not inconsiderable amount of money.
If the valuation of Liberbank’s assets is the same as those of Popular, Bain and Oceanwood will have invested just over €230 million in the operation.
A notable difference with respect to Popular’s operation is that there is a third player in Liberbank’s case. The fund Oceanwood, the bank’s largest shareholder after the banking foundations, which has also committed to participating in the capital increase in an even higher proportion to the amount that corresponds to it based on its current stake, has also decided to form part of the new real estate company, which will be constituted as a Socimi. Those two decisions may be interpreted as a clear commitment that the entity will be worth more in the future than it is at the moment and as a clear vote in favour of the current management team (…)
Original story: Expansión (by Salvador Arancibia)
Translation: Carmel Drake