24 June 2018 – La Vanguardia
The deadline for the finalist funds to submit their bids to be awarded Banco Sabadell’s four portfolios comprising problem assets, whose combined value amounts to almost €11 billion, will close definitively on Wednesday, 27 June, the date on which the entity will have to choose the winners, according to sources close to funds consulted by Europa Press.
The entity chaired by Josep Oliu is looking to divest its Challenger and Coliseum portfolios, which amount to around €7.5 billion and comprise foreclosed assets (REO) and Makalu and Galerna, worth €2.5 billion and €900 million, respectively, comprising non-performing loans (NPLs).
Nevertheless, according to explanations provided by market sources, Sabadell is only going to be able to deconsolidate the largest portfolio from its balance sheet this year, the so-called Challenger portfolio (worth around €5 billion). The others will have to wait as they need to receive the green light from the Deposit Guarantee Fund (FGD) since the properties that constitute them proceed from the former CAM – Caja de Ahorros del Mediterráneo – a process that could take months (…).
The main international funds specialising in distressed debt and assets in risk of default are bidding for these portfolios. They are proposing significant discounts to their nominal values and their recoveries depends on the guarantee or collateral.
The strong investor appetite for Sabadell’s toxic property comes in a context in which political uncertainty is continuing to rage on the Old Continent. Cerberus, Blackstone, Lone Star and Oaktree are some of the finalist funds to be awarded the first two portfolios, whilst Deutsche Bank, Bain Capital, Oaktree and CPPIB are going to compete for the assets in the other two, according to sources at the funds and banks, speaking to ‘El Confidencial’ and ‘Vozpópuli’.
Significant reduction in real estate exposure
With the deconsolidation of its largest portfolio alone, Sabadell’s real estate exposure would fall below the €10 billion threshold, whilst the sale of all four portfolios would reduce its balance to around €4 billion, according to the accounts published by the bank for the first quarter of 2018. Thus, once the transactions have been completed, Sabadell’s accounts will have a much healthier balance sheet.
As at 31 March 2018, the entity had €14.9 billion in problem assets, which represented a decrease of 17.6% compared to the end of the same period a year earlier, when the figure amounted to €18.1 billion. The coverage ratio of the problem assets amounted to 55.2%, after applying IFRS 9, with a doubtful coverage ratio of 56.6% and a foreclosed asset coverage ratio of 53.7%. Similarly, the ratio of net problem assets over total assets stood at 3.1% (…).
A source of liquidity for the banks
In this way, Banco Sabadell is following in the footsteps of other entities such as Santander, BBVA and CaixaBank in the reduction of its heavy backpack of toxic assets, which the financial crisis left on their balance sheets (…).
Original story: La Vanguardia
Translation: Carmel Drake