BBVA Awaits FGD’s Approval To Sell €14,000M RE Portfolio To Cerberus

13 November 2017 – Voz Pópuli

The largest operation of the home stretch of 2017 is pushing ahead. BBVA and Cerberus are close to reaching an agreement regarding the sale of a large proportion of the bank’s real estate assets to the US fund. Financial sources consulted by Vozpópuli indicate that a deal may be signed within the next few weeks, between late November and early December.

One of the points still being discussed is the perimeter (of the transaction). The sources consulted indicate that what is on the table is the option of selling a stake in a new company with assets and loans worth €14,000 million.

The same sources add that an agreement could have already been reached if it hadn’t been for the crisis in Cataluña and the need for the Deposit Guarantee Fund (‘Fondo de Garantía de Depósitos’ or FGD) to give its approval. BBVA received an asset protection scheme (‘Esquema de protección de activos’ or EPA) for which the FGD committed to cover “80% of the losses resulting from a portfolio of assets worth €7,359.7 million”.

BBVA has real estate exposure on its balance sheet amounting to €17,774 million in total, according to the most recent figures. Of that figure, foreclosed assets (€11,937 million) and doubtful loans (€3,357 million) account for €15,300 million. Those loans and properties have a coverage ratio of more than 61%. For this reason, BBVA could sell them for 39% of their appraisal value without having to recognise any losses. Even so, the FGD would still need to approve any deal.

The need for consent from the FGD could delay any asset sale for several months. That is what has happened, on more than one occasion, to Banco Sabadell, such as with Project Normandy. It is worth remembering that the FGD’s Management Committee comprises not only regulators and Government members but also bankers, who do not want to spend even one more euro of their resources (…).

Although BBVA’s sale (known as Project Marina and Sena) is on track, the sources consulted indicate that it could all be thrown up in the air at any moment. “It would not be the first time that an operation that has almost been finalised dies off because of one of BBVA’s management committees or Board of Director meetings”, they say. The same thing is happening with Cerberus, one of the most inflexible funds when it comes to price: “Once the price has been fixed, it is very difficult to move it or play with counter-offers”, they add.

This operation has generated a lot of commotion amongst other opportunistic funds, many of whom were not invited to participate, and who have even indicated their displeasure to BBVA’s leaders. The negotiations between Cerberus and the bank arose after the fund’s President, John W. Snow (former US Treasury Secretary) cracked the whip over his own management team in Spain. He did so after Cerberus missed out on the sale of Popular’s real estate, which was awarded to Blackstone.

Snow himself decided to come to Madrid in person to meet with the President of BBVA, Francisco González (pictured above) and propose an operation similar in size to Project Quasar (Popular). Indeed, Cerberus purchased a €600 million portfolio from the bank in June, Project Jaipur, which gave rise to the current negotiations.

Although the operation still hangs in the balance, BBVA has never been as close to sealing an agreement like this one. There is a lot of optimism amongst the advisors to the operation, PwC and Linklaters. But, for the time being, anything can happen.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Habitat Considers Moving Its HQ To Madrid Due To Cataluña Crisis

7 November 2017 – El Confidencial

The historical property developer Habitat Inmobiliaria is on its way to becoming the next iconic Catalan company to abandon its region of origin in order to avoid the risks associated with the current crisis being caused by the independence challenge. The company’s shareholders, led by Capstone Equities Management, have been discussing the possible transfer of its corporate headquarters from number 458 Avenida Diagonal in Barcelona to Madrid for several weeks now; they want to reduce any risks to the sales plans being developed by its commercial network (in other parts of the country).

The company, founded in 1953, was owned by the Figueras family until November 2015, when it was taken over by Capstone and a group of funds, including Värde, in an operation that included a multi-million debt discount and in which Goldman Sachs and Bank of America also participated. The change in ownership led, in turn, to an about-turn in its management. Rafael del Valle took over the role of President and a significant part of the operations were moved to Madrid, although the registered address of Promociones Habitat, as the company is known formally, was maintained in Barcelona.

Now, the owners have initiated a sales process and the private equity firms Apollo, Oaktree and Bain are all competing in the final round, according to El Confidencial. In this context, the uncertainty generated in Catalaña could give the final push to move, however, the debate is on-going internally, which sources from the real estate company freely admit.

The problem for Habitat is not so much its exposure to the Catalan market itself, but more a question of its image in the commercial network across the rest of Spain. Of the 11 real estate developments that it currently has up for sale, only one is located in Cataluña, specifically, in Cornellà de Llobregat, called Parc de Can Mercader. The rest are located in Madrid (four developments), the Community of Valencia (four), Andalucía (three), Las Palmas de Gran Canaria and Portugal (one each). In other words, the problem facing the company is the opposition that its products may receive given the fact that it is a Catalan company, a phenomenon that is being seen in other sectors.

If this change of registered address comes about, Habitat will be the second large real estate company to abandon Cataluña for political reasons after the Board of Directors of Inmobiliaria Colonial also decided, on 9 October, to move from Avenida Diagonal in Barcelona to Paseo de la Castellana in Madrid.

Original story: El Confidencial (by Víctor Romero)

Translation: Carmel Drake

Apollo Warns Of Slowdown In Investment Activity In Cataluña

19 October 2017 – Expansión

Andrés Rubio, Head of Europe for Apollo Global Management, one of the largest funds in the world and one of the most active in Spain, has said in London that the Catalan crisis “is not good” for Spain or for Cataluña and that investors are already taking into account the risk caused by the political instability.

At a conference organised by EY and the Spanish Association of Capital, Growth and Investment (Ascri) in the British capital, Rubio explained that “Spain is a model country in Europe for how it has dealt with the (financial) crisis and for the reforms that it has undertaken, above all in the employment, taxation and banking fields”. Nevertheless, “what we are seeing now is not good at all, either for Spain or for Cataluña”, he said. “Any investor looking at Cataluña now is analysing the risk”, explained Rubio, who acknowledges that he has seen a sharp slowdown in the market. “There is less activity in Cataluña now than there was a month ago, that’s for sure”.

Apollo Global Management has been one of the funds that has invested the most in Spain in recent years. Since it decided to back the Spanish market at the height of the (financial) crisis, it has invested around €1,000 million. Its main assets include an 85% stake in Altamira Real Estate, a real estate manager purchased from Banco Santander in November 2013 for €664 million, and Evo Banc, which it acquired from Nova Caixa Galicia for €60 million. It also owns a portfolio of hotels purchased from La Caixa and it wants to grow further in that segment.

Funds

Rubio’s comments echo the opinion of the other major funds meeting in London to analyse investment opportunities in Spain. Many expressed their concern for the situation in Cataluña and said that it may affect their investment decisions over the medium term. “Uncertainty is never good”, said Fernando Chueca, Director at Carlyle. “Nobody likes instability”, explained Nader Sabaqqian, from 360 Capital Partners, a technological fund that currently holds investments in two companies headquartered in Barcelona – Xceed and 21 Buttons – and which wants to make more purchases in Spain.

Above all, investors fear the political instability that may be created within the central Government, as well as the social discontent that is growing in Cataluña as the political tension rises. The heads of most of the large funds with interests in Spain say that, for the time being, they are not going to take any drastic decisions, but if the uncertainty continues, they will have to start to take action. “International investments have been suspended in Cataluña for a year now”, said another director.

Rubio, who is a Spanish citizen, but who was raised in New York, praised the clean up of the Spanish banking system during his speech at the conference. He explained that the sector has seen a reduction in the number of banks from 49 to 12 since the start of the crisis. He added that “Spain has a tailwind” and that Apollo is satisfied with the investments it has made. “We believe in Spain and we will continue investing”, he said.

Original story: Expansión (by Amparo Polo)

Translation: Carmel Drake