The Fund Centricus Enters the Bid to Buy Solvia

28 November 2018 – Expansión

A candidate with an exotic air about it has entered the auction for Solvia, the real estate subsidiary controlled in its entirety by Sabadell. The fund Centricus, which is headquartered in London but which has several Chinese and Japanese shareholders, has submitted a binding offer to acquire Sabadell’s asset management platform, according to sources familiar with the process.

Official sources at the bank preferred not to comment in this regard. Centricus wants to enter the Spanish market to compete with the large investment funds specialising in asset management, such as two of the other players interested in Solvia: Cerberus and Intrum, formerly Lindorff.

Centricus manages assets worth more than USD 20 billion and has worked together with the Japanese giant SoftBank to raise funds amounting to USD 100 billion at the international level.

Asian alliances

The British fund also recently joined forces with the Chinese companies China Merchants Group and SPF Group to launch a USD 15 billion fund to invest in technology companies.

Centricus, Cerberus and Intrum have all submitted binding offers for Solvia amounting to more than €300 million. According to sources close to the operation, one of the funds has even offered an amount close to the €400 million that Sabadell aspires to receive. The bank has awarded the mandate to divest Solvia to Alantra.

Sabadell activated the sale of its real estate platform after cleaning up €11.5 billion in toxic assets from its balance sheet. At that time, it preferred to not sell Solvia, like the majority of its competitors did, to try to maximise its revenues. The bank considers that the real estate platform has significant latent profits. Cerberus could be the favourite in the contest since it is now holding advanced conversations with the entity.

Natural buyer

The US fund is the “natural” buyer for Solvia, say financial sources. In fact, during the summer, Cerberus acquired two large portfolios of foreclosed properties from Sabadell (Challenger and Coliseum), with a combined gross value of €9.1 billion.

Sabadell wants to sign the sale of the real estate platform before the end of this year to have its balance sheet free of property remnants. Solvia manages 148,000 assets, with a value of more than €30 billion. In parallel, the bank has also placed up for sale its property developer subsidiary, Solvia Desarrollos Inmobiliarios. The completion of that operation has been delayed until the beginning of 2019.

Original story: Expansión (by R. Sampedro)

Translation: Carmel Drake

Sabadell Receives 7 Offers to Liquidate its Doubtful Debt

28 June 2018 – Expansión

In the end, seven international funds have presented offers to Banco Sabadell to be awarded one or more of the four portfolios that the entity has put on the market this year to liquidate almost all of its problem asset balance. The funds in question are Cerberus, Lone Star, Blackstone, Oaktree, Deutsche Bank, Bain Capital and CPPIB, although not all of them have bid for all of the assets, given that three of the funds are only interested in the foreclosed properties and the four others only want to purchase the non-performing loans (NPLs).

On the advice of KPMG and Alantra, Sabadell has set itself the objective of divesting toxic assets worth €10.8 billion this month, before the summer. That figure is equivalent to 72% of the bank’s total problem assets, which amounted to €14.9 billion at the end of the first quarter. Of that total figure, €7.5 billion are doubtful balances and €7.4 billion are foreclosed.

This volume of non-performing assets, which is weighing down on the entity’s balance sheet, has been packaged into four portfolios called Challenger (€5 billion), Coliseum (€2.5 billion), Makalu (€2.4 billion) and Galerna (€900 million). Just over half, €5.8 billion, are assets inherited from the purchase of CAM, and, as such, they form part of the Asset Protection Scheme (EPA). As a result, the divestment of three of the portfolios (Coliseum, Galerna and Makalu) must first be approved by the Deposit Guarantee Fund (FGD), which is the entity that will cover 80% of the losses generated by those protected portfolios.

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake

Sabadell Set to Sell €10bn of Toxic RE in June After Receiving Deluge of Binding Offers

25 May 2018 – El Confidencial

Banco Sabadell has entered the home stretch of its mission to sell all of its toxic property, a rapid process that is expected to be completed in June. The entity has received a deluge of binding offers for the four portfolios that it currently has up for sale – Coliseum, Challenger, Makalu and Galerna – which have a combined gross value of more than €10 billion.

The first two portfolios contain foreclosed assets (REOs) and include Cerberus, Blackstone, Lone Star and Oaktree as potential buyers (in the final round); meanwhile, the other two portfolios comprise secured loans with real estate collateral (NPLs) and their potential buyers include Deutsche Bank, Lone Star, Bain Capital and Oaktree, according to confirmation from several market sources.

These proposals are now with the Steering Committee, which means that, once that body has given its verdict, the process will be passed to the Board of Directors, chaired by Josep Oliu (pictured above, right), which is the body that has to ratify the name of the winner.

In theory, this ruling is going to be issued within a matter of weeks, in June and, in any case, before August. Sources at the entity have declined to comment on either the finalists or the calendar.

Portfolios and the FGD

Having chosen the names of the winners, Sabadell will be able to close the sale of Challenger, the largest of all of these portfolios, with a gross volume of almost €5 billion; it is the only one that does not need approval from the Deposit Guarantee Fund (FGD), given that all of the assets contained therein come from the Catalan entity itself.

By contrast, the €2.5 billion in properties that comprise Coliseum come from the former entity CAM – Caja de Ahorros del Mediterráneo – and, therefore, need to be approved by the FGD, since it would have to cover 80% of the losses. The same applies to Makalu (€2.5 billion in loans) and Galerna (€900 million).

The need to receive this approval means that it is likely that the entity will have to wait until next year to deconsolidate all of these toxic assets, although it will be able to sign a sales agreement conditional upon that authorisation, like BBVA did in the case of the sale agreed with Cerberus last year to transfer all of its property, some of which is also subject to the FGD’s approval.

By contrast, this year, Sabadell could remove almost €5 billion in the form of Challenger from its perimeter, a step forward in terms of fulfilling the requirements of the European Central Bank (ECB), which is putting pressure on Spanish entities to remove the impact of a decade of real estate crisis from their balances sheets.

Solvia is being left out of the sale

At the end of the first quarter, the entity held €14.9 billion in problem assets, down by 17.6% compared to a year earlier, with an average coverage ratio of 55.2% (56.6% for doubtful debt and 53.7% for foreclosed assets), a percentage that serves as a reference for the funds when calculating their offer prices.

With the sale of all of these portfolios, the entity would reduce its real estate exposure to less than €5 billion.  Since the beginning of the crisis, that exposure has been managed by Sabadell’s own servicer: Solvia.

Some of the finalist funds had asked the entity to include Solvia in the transaction, according to Voz Pópuli, but in the end, that possibility has been ruled out by the bank, as it considers that the valuation of its asset manager is higher than the price that would be offered by funds.

In addition, as El Confidencial revealed, the servicer has created its own property developer, Solvia Desarrollos Inmobiliarios, which has €1,252 million in managed assets and which is also finalising an agreement with Oaktree to create a joint venture promoter.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake