Project Silk: Sareb Puts €1,000M Debt Portfolio Up For Sale

12 August 2015 – Expansión

Sareb is getting ready to increase its revenues during the last few months of the year. The first half of 2015 saw a slow down in the bad bank’s property sales, as it focused on migrating assets across to new managers. However, the company chaired by Jaime Echegoyen (pictured above) is now going to concentrate on selling portfolios to large funds.

In this context, Sareb is currently preparing its largest transaction to date: Project Silk, comprising small unpaid loans to property developers, amounting to €1,000 million in total.

The project is being led by Haya Real Estate, the real estate manager heir of Bankia Habitat. The firm, which is owned by Cerberus, is responsible for administering the loans transferred by the group chaired by José Ignacio Goirigolzarri.

Initially, property developers will be offered the option to buy up their own debt. Then, any loans that have not been sold will be packaged up and sold in a competitive tender process, to be managed by N+1.

At the end of 2014, the company chaired by Echegoyen held assets amounting to €44,263 million, of which three quarters related to loans.

Revenue drivers

Sales to institutional investors are going to be key for Sareb in 2015, given the slowdown in terms of house sales. Since the end of last year, the company has been focusing its efforts on the process to migrate assets from the former managers – i.e. the entities that transferred €50,000 million worth of problem homes and loans – to the four chosen firms: Haya Real Estate, Solvia, Servihabitat and Altamira.

This migration is due to be completed at the end of the year. Meanwhile, Sareb sold 5,400 homes during the first half of 2015, i.e. one third fewer than during the same period in 2014.

In this context, it is critical that the bad bank increases its revenues from the institutional channel, since its main objective is still the repayment of its debt; and it has set itself the goal of repaying €3,000 million at the end of this year. Currently, the company still needs to return c. €45,000 million of bonds guaranteed by the State.

Sareb has at least two other portfolios, besides Project Silk, up for sale at the moment. Project Birdie is in the most advanced stage of the three – whereby the bad bank wants to sell assets inherited from Polaris. That portfolio comprises three golf courses, two five-star hotels and several residential complexes in Murcia, with a nominal value of €500 million. Sareb inherited them from loans to property developers granted by Banco de Valencia and Bankia.

In addition, the company has launched the sale of a €180 million debt portfolio, secured mainly by land, as part of Project Vega, according to Idealista News.

Many expect Sareb to put new portfolios up for sale after the summer, just like it has done in previous years. During 2014, the company transferred 11 large portfolios for €1,115 million, which accounted for 20% of its revenues. That figure is expected to be higher in 2015. (…).

Upcoming challenges

In addition to its objective of increasing revenues, Sareb faces several other challenges between now and the end of the year, including: completing the migrations to the new managers and adapting to the new accounting circular that the Bank of Spain is preparing for the company.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake