Sabadell Buys Núñez i Navarro’s Loans From Sareb

24 February 2016 – Expansión

A new operation has been signed between Banco Sabadell and Sareb. The entity led by Josep Oliu has acquired a portfolio containing thirteen loans, with a nominal value of €131 million from the bad bank. None of the loans are in arrears.

According to sources in the real estate sector familiar with the operation, the loans acquired by Sabadell were granted back in the day to the property developer Núñez i Navarro, by one of the (financial) entities that was later nationalised. Subsequently, the loans fell into the hands of Sareb. The real estate company, owned by the former President of Fútbol Club Barcelona, will make its loan repayments to Sabadell from now on and not to Sareb, which hereby makes progress in its process to divest its assets.

The thirteen loans are associated with 185 real estate collaterals in total, primarily commercial premises, offices, homes and land, located for the most part in the provinces of Barcelona and Tarragona. The amount paid by Sabadell to Sareb for this performing loan portfolio has not been disclosed, but the sources consulted say that the bank will obtain a return of 10% from the portfolio.

Strong interest

The offer submitted by Sabadell, through its specialist Real Estate Finance arm, won an auction in which ten investors participated, mainly investment funds specialising in the purchase of debt. The law firm Ashurst advised the Catalan bank, whilst Sareb was supported by the advisory firm Irea and the law firm Baker & McKenzie. Given that Sabadell forms part of Sareb’s Board of Directors, the bank’s offer was subject to “internal rules governing conflicts of interest”, said the bad bank yesterday. The FROB holds a 45% stake in Sareb and Spanish banks own the remaining 55%.

Sabadell, through Solvia, also manages assets on behalf of Sareb, with a gross value of €13,000 million. In November, Sareb also engaged Solvia to manage the construction of ten real estate developments.

Original story: Expansión (by S. Saborit)

Translation: Carmel Drake

Sareb Will Have To Capitalize More Debt To Avoid Bankruptcy

5 October 2015 – Expansión

On Friday, the Bank of Spain published an accounting circular that Sareb will be obliged to comply with this year. The company responsible for managing the real estate assets inherited from the banks that received public aid, acknowledged immediately that it will have to recognise new provisions. This means that the company will record losses once again. Furthermore, it is very likely that, as a result, Sareb will have to covert some of its subordinated debt into capital to prevent it from being wound up.

Sareb is coming to the end of its third year and is not scheduled to be wound up until it is 15 years old. However, during its first two years, it recorded total losses of more than €800 million, which reduced its initial capital from €1,200 million to just less than €400 million.

Now, the accounting circular, drafted by the Bank of Spain, is requiring that Sareb value all of its asset this year and next. This will involve a considerable effort by the company, which clearly separates out all of its assets. Sareb’s balance sheet comprises 100,000 own properties, 400,000 collaterals as guarantees and 70,000 loans.

The cost of (re)valuing the whole portfolio is estimated at €25 million until 2017, which would clearly have an impact on total costs.

The properties owned by Sareb should not represent a significant problem because the company is familiar with them, and has pretty good idea of their approximate market values. They even think that overall, their owned properties could generate some gains, although any such gains would not appear on the balance sheet.

The problem exists when it comes to valuing the loans and collateral guarantees that support them, because Sareb does not control or know those assets in as much detail. The general view is that valuing those assets at current prices will result in significant losses, which would be reflected directly in the income statement given that provisions would be required.

For this reason, and based on information from the experts at the company, a statement was made to the Board of Directors, formed by representatives of the Frob, which owns 45% of Sareb, and by representatives of the private (owner) banks, which own the remaining 55% majority stake, that it is certain that Sareb will register losses once again this year and may therefore need to convert some of its subordinated debt (subscribed by the shareholders in the same proportion to their capital stakes) into capital to rebuild the financial position of the company.

Sareb has subordinated debt amounting to €3,600 million, a much higher figure than it would have to convert (into capital) to solve the problem posed by the circular, without having to resort to a possible capital increase.

Although officially, the heads of Sareb have not communicated a specific figure to the Board in terms of the size of the losses for the year, sources at the bad bank are talking about provisions of no less than €500 million.

This year, Sareb is selling fewer properties to individuals than it did last year, for various reasons, including because the management of certain assets has been transferred from the ceding banks to specialist companies, which won the tender held earlier in the year.

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake