28/05/2014 – ExpansionPro
Three large fund groups tilt as favorites at the bidding for troublesome loans of nationalized Catalunya Banc. Yesterday, the Catalonian entity received first non-binding offers for the €7 billion low-quality credit portfolio.
Given the magnitude and complexity of the ongoing operation called – perhaps adecuately – the “Hercules Project“, some of bidders decided to form alliances. Thus, Blackstone joined forces with TPG, Apollo with Centerbridge, while Cerberus allied with Goldman Sachs. Sources with knowledge of the process say the offers submitted by the favorites oscillate around €3 billion.
The auction organizators, the FROB (Spain´s Fund for Banking Restructuring), advised by N+1 and Baker & McKenzie have offered a credit line for the bidders which assumes financing of a part of the portfolio. Other funds that might find it difficult to raise such a terrifying amount of money can therefore benefit from the opportunity and compete with the favorites.
For example Elliot, Fortress, Kennedy Wilson and Värde Partners or WL Ross also have a crush on the portfolio.
What is more, it became obvious that the FROB will have to back the loan portfolio with State-guarantees. If Catalunya Banc sells the portfolio for €3 billion, the Fund will have to spend €1.5 billion on aids.
The “Hercules” includes three groups of loans: performing valued at around €2.9 billion, sub-performing of over €1 billion and a totally non-performing credit worth of more than €2.9 billion. In total, 111.000 mortgages at estimated value of €6.95 billion.
Taking into consideration the volume of the package and the fact that most of the loans are at least doubtful, preferably funds with a collection servicer in Spain will be chosen first.
In turn, Cerberus has been the owner of Bankia Habitat since early 2013. The fund has cooperated with Goldman Sachs before.
The loan sale is just a part of the three-fold plan of selling Catalunya Banc to private hands, involving also shedding the office network outside of Catalonia and subsequently the sale of the nationalized entity itself.
Original article: Expansión (by Jorge Zuloaga, Miercoles 28 de Mayo 2014, pp. 17)
Translation: AURA REE