Santander Sells €400M NPL Portfolio To Grove

28 December 2015 – Expansión

Santander is cleaning up its balance sheet. Within the last few days, the entity chaired by Ana Botín (pictured above) has completed the transfer of a portfolio of non-performing loans amounting to €400 million to the Grove group, a subsidiary of the US entity Encore.

The operation represents one of the last divestments in the banking sector in 2015 after those signed (in recent weeks) by Bankia, which sold €650 million corporate loans to Deutsche Bank; and by CaixaBank, which sold €800 million doubtful developer loans to TPG and Goldman Sachs.

Santander’s sale forms part of Project Hungaroring, which initially included €700 million non-performing loans to SMEs. In the end, the perimeter has been reduced to €400 million.

This is one of the largest operations involving the sale of non-performing (unsecured) loans in 2015, given that entities have been more focused on getting rid of assets linked to the real estate market, such as mortgages and doubtful loans to property developers.

Deceleration

As a result, during 2015, non-performing loan portfolios worth around €3,000 million have been transferred in 2015, such as the portfolio sold by Sabadell (€800 million) to Aiqon; the portfolio sold by CaixaBank (€780 million) to Cerberus; the portfolio sold by Cajamar (€640 milion), also to the US fund; the portfolio sold by Ibercaja (€200 million) to Seer Capital; and BMN’s portfolio (€350 million), which has just been sold to Link Financial. Popular was also recently sounding out the sale of a portfolio worth just over €300 million.

Even so, the figure of around €3,000 million in non-performing loan sales in 2015 is significantly lower than previous years. In 2013, €12,000 million of loans were transferred and in 2014, the figure reached around €15,000 million.

Project Hungaroring is the first major operation performed by Santander this year. The group launched two projects during the first half of the year: Project Formentera, with €170 million of hotel debt; and Project Mamut, with €800 million overdue mortgages. Nevertheless, the latter was suspended during the summer following the change in the market due to the Greek and Chinese crises.

Santander had a default rate of 6.61% in Spain at the end of September, compared with an average of 4.5% for the group as a whole. Its real estate balance sheet has grown by €5,600 million in the last year, due to the inclusion of its stake in Metrovacesa.

The financial institution began to divest from property in 2013, with the sale of 85% of its real estate platform Altamira, to the US fund Apollo for €664 million.

In order to continue its sale of these assets, Santander has hired the Spanish director of Morgan Stanley, Javier García Carranza, as the Deputy General Manager and Head of Restructuring, Real Estate, Investments and Private Equity.

Buyer

The purchasing fund, Encore, is one of the main groups operating in the recovery business on the global level. It is conducting the operation through its subsidiary Grove, which recently acquired a loan management platform in Spain, called Lucania. Encore is listed on the Nasdaq with a market capitalisation of US$ 760 million (€695 million).

Another company owned by this US group, Cabot Credit Management Group, also made its first investment in Spain recently, with the purchase of Gesif from the US fund Elliott.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

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