20 July 2018 – El Confidencial
It has fulfilled its objective. Banco Sabadell has managed to unblock a decade of real estate crisis before going on holiday, thanks to the agreement signed with Cerberus to transfer it €9.1 billion gross in toxic assets and the imminent sale of another portfolio worth €2.5 billion gross to Deutsche Bank.
Those two divestments, together with the sale of €900 million in loans agreed already with Axactor, according to Voz Pópuli, will allow the entity chaired by Josep Oliu to remove €12.5 billion gross in property from its balance sheet. But the bank still needs to undertake a second round of divestments in its strategy to completely finish unlinking itself from the real estate sector.
The Catalan entity still has around €2 billion in toxic assets on its balance sheet, a portfolio that it plans to quickly put up for sale with the aim of also removing it from its balance sheet before the end of this year or during the first half of next year.
Until then, Solvia will continue to manage those properties, something that it will also do with the portfolio sold to Cerberus, given that the transfer included an exclusive management agreement, as well as any assets that the bank forecloses in the coming weeks.
But that interest from the entity in maintaining the link to its real estate asset manager is brief and interested, given that Oliu’s ultimate objective is to also sell Solvia in the medium term.
In fact, several of the funds that bid for the €12.5 billion that Sabadell has just sold asked for Solvia to be included in the process, a request that did not end up being fulfilled for several reasons. On the one hand, due to the price offered, given that the almost €1 billion at which they were valuing the servicer was insufficient for the bank.
On the other hand, because Sabadell whereby retains an ace up its sleeve ahead of the likely consolidation that this sector is going to experience and the growing appetite that exists between real estate funds and private equity firms for the servicers.
From that perspective, although Cerberus has not been able to acquire Solvia now, the fact that it has purchased the bulk of Sabadell’s assets, which are managed by that subsidiary, confers it an advantageous position with a view to the future sales process, which could be launched next year.
That option would allow the merger conservations that were held between Haya and Solvia in the past to resume; those negotiations never ended up bearing fruit, but they have remained in the sector’s imagination ever since.
Ahead of that potential marriage, the management contracts that both servicers have with Sareb will also be key, given that they condition their conversations in various ways.
On the one hand, the sum of these two servicers would result in a position of dominance over the bad bank’s assets, which may cause that entity to break one of the two agreements.
On the other hand, right now, question marks exist over both the renewal of Haya’s contract, the first one to expire, and the plans that Sareb has to accelerate the sale of all of its assets.
The entity chaired by Jaime Echegoyen had engaged Goldman Sachs to transfer the €30 billion in assets that comprise Haya’s portfolio, an operation considered to be the first of several similar moves with the portfolios of the other servicers.
Although the change of Government has left those plans up in the air, and as Sareb awaits to find out the new Executive’s strategy for its business, both Sabadell and Cerberus are also interested in gaining time and seeing how the horizon clears before making their next move.
Cerberus has valued the two portfolios that it has acquired from the bank at €3.9 billion. Their gross book value amounts to €9.1 billion, which means that the operation has been closed with a discount of 58%.
Original story: El Confidencial (by Ruth Ugalde)
Translation: Carmel Drake