Debt Recovery Firm KRUK Prepares to Make its Real Estate Debut

18 March 2019 – Bolsa Mania

The debt recovery firm KRUK is getting ready to enter the real estate market. The company, which has already acquired debt portfolios in other segments (e.g. consumer loans) from entities such as Bankia and Unicaja, now wants to start buying real estate-related debt portfolios from the banks, servicers and Sareb.

Until now, the group has specialised in the unsecured segment in Spain. Last year, it acquired a portfolio of doubtful consumer loans from Bankia and a year earlier, it did the same with another similar portfolio from Unicaja. A few months ago, it purchased another from Carrefour’s financial arm.

Further afield, the company currently has a presence in Poland, Romania, the Czech Republic, Slovakia, Germany, Italy and Spain, with the last two markets representing its priorities for the time being.

Original story: Bolsa Mania (by Elena Lozano)

Translation/Summary: Carmel Drake

Haya Real Estate Prepares for its Stock Market Debut

23 January 2018 – Cinco Días

Haya Real Estate is another player in the real estate sector that is heading towards the stock market. The firm manages property developer loans and foreclosed real estate assets on behalf of Bankia, Sareb, Cajamar, Liberbank, BBVA and other financial institutions, worth €39.884 billion.

The company is owned by the private equity fund Cerberus, which created it back in October 2013 after acquiring a firm dedicated to real estate management from Bankia, called Bankia Habitat, in light of the need for the Spanish financial sector to get rid of its property-related toxic assets in a professional way.

Sources at the investment bank indicate that Haya’s debut on the Spanish stock market has been sketched out and will follow the format of the debuts of the property developers Neinor and Aedas, in 2017, and the upcoming debuts of Metrovacesa and Vía Célere. No decision has yet been taken regarding the valuation or percentage of the stake that Cerberus will sell. The news of Haya’s possible stock market debut was published by Bloomberg on Monday night. A spokesperson for Haya declined to comment on the news.

Haya, led by Carlos Abad Rico (formerly of Canal + and Sogecable) offers services throughout the entire chain of the real estate sector, but it is not a property developer: it manages, administers, securitises and sells assets but does not own them. The company mainly focuses on two businesses. Firstly, the advice and subscription of loans and guarantees, the management and recovery of debt and the conversion of the obligations on property developer loans into foreclosed real estate assets. And, secondly, the recovery and management of property through its sale or rental. The firm employs 680 professionals and has a sales network comprising 2,400 brokers. The value of the firm’s property developer debt portfolio amounts to €28.719 billion and of its real estate assets is €11.165 billion.

Haya recorded EBITDA of €89.9 million during the first nine months of 2017, up by 54% compared to the same period a year earlier, with sales of assets worth around €2.5 billion and an effective turnover (essentially commissions) of €165.8 million. The average management fee during the first nine months of last year was 4.25%.

Competitors

Haya has been growing with aplomb since 2013, but it has several major rivals. Blackstone, which purchased 51% of Popular’s real estate assets from Santander last summer for more than €5 billion, created Anticipa Real Estate, under the structure of the former Cataluña Caixa Inmobiliaria. That platform acquired 40,000 mortgages from the extinct Catalan entity for €4.123 billion in 2015. Since then, it has acquired those types of mortgage debt portfolios, with an investment that amounts to around €7 billion.

Meanwhile, Servihabitat belongs to the fund Texas Pacific Group, (TPG), which has held a 51% stake in the servicer since September 2013, when CaixaBank sold it that percentage, holding onto the remaining 49%. It manages assets worth around €50 billion. Altamira is owned by Santander (15%) and the fund Apollo (85%), which acquired its stake in November 2013. Its assets in Spain are also worth around €50 billion. Solvia, owned by Sabadell, manages assets linked to real estate worth more than €31 billion.

Original story: Cinco Días (by Pablo Martín Simón, Laura Salces Acebes & Alfonso Simón Ruiz)

Translation: Carmel Drake

Axactor Buys Its Fifth Debt Portfolio In Spain For €565M

2 August 2016 – Cinco Días

The Norwegian company Axactor is continuing with its commitment to Spain. Yesterday, it announced the purchase of a new debt portfolio in the Spanish market for €565 million, which represents the company’s fifth operation this year. In this way, Axactor is pushing ahead with its growth strategy in Spain and is strengthening its position as one of the main operators in the debt management sector. Juan Manuel Gutiérrez (pictured above right), Head of Axactor in Spain, confirmed that “ we are totally focused on growth: this acquisition forms part of our plans to continue increasing our presence in the Spanish market, through both the purchase of portfolios and the management of debt for third parties”.

The new debt portfolio acquired by Axactor comprises secured and unsecured loans amounting to €565 million. The portfolio includes almost 30,000 accounts held by individuals and small and medium-sized companies. This acquisition comes after the firm closed another deal in July in the primary market, when it purchased a debt portfolio for €144 million from Banco Mare Nostrum.

Since December 2015, the company has tripled the number of cases under management (from 250,000 to 780,000) and it has quadrupled the total volume of debt under management (from €2,140 million to €9,035 million). Spain has become the fastest growing market for the group and is at the centre of its strategy to become the leader of the debt management market in mainland Europe. Its progress was boosted by the acquisition of Geslico, an operation that allowed the Nordic firm to become the second largest operator in this business segment.

In addition, the incorporation of that company into the group has allowed Axactor to cover the entire value chain of the debt business and has facilitated operations involving collections and debt purchases thanks to a complex IT system to which Axactor has obtained access as a result of the integration of Geslico.

Axactor bought the management company of the former savings banks from the opportunistic fund Fortress, following the US firm’s withdrawal from the country. In this way, Axactor began its international expansion several months ago and chose Spain for that purpose. Its strategy involves becoming the leader of the debt management market in mainland Europe. “Spain has become the launch pad for this strategy and a key market for the Norwegian group”, said the firm, which is listed on the stock exchange.

Original story: Cinco Días (by A.G.)

Translation: Carmel Drake

BBVA Reorganises Its “Bad Bank” After Key Director Leaves

6 June 2016 – Expansión

BBVA has put a new spin on the organisation of its bad bank. The entity chaired by Francisco González recently announced the disappearance of its problem assets division – Non Performing Assets – after agreeing the departure of its main Director and dividing up its functions between two other divisions, according to financial sources.

The Spanish group already reconfigured the division just over two years ago. Then, it handed over the task of accelerating the sale of problem assets to Pedro Urresti (pictured above), the Director who has now just left the entity as part of the reorganisation.

Urresti joined BBVA in 2006 from JPMorgan, where he had been responsible for Capital Markets in Spain and Portugal. At BBVA, where he replaced Carlos Pertego – the current Director of Goldman Sachs – he led the Financial Management and Investor Relations department until 2011, when González put him in charge of problem assets.

Following the dissolution of that area and the departure of Urresti, BBVA has chosen to divide its functions and share them out between two divisions. On the one hand, everything relating to real estate assets will be transferred to BBVA Real Estate – the unit in which Anida sits – led by Agustín Vidal-Aragón. On the other hand, the activity relating to the sale of debt portfolios will be transferred to Javier Rodríguez Soler, the bank’s Director of Strategy and M&A.

Reinforcement

Rodríguez Soler was one of the Directors who’s profile increased following the reorganisation of the management team performed by González last year, when he appointed Carlos Torres as the new CEO, to replace Ángel Cano. The Head of M&A, who until then had reported to the Finance Director, Jaime Sáenz de Tejada, went on to lead his own division, reporting directly to the President.

As a result of the new changes, BBVA hopes to accelerate the sale of its real estate assets, whose balance barely decreased last year, due to the takeover of Catalunya Banc.

During the two and a half years that Urresti has been in charge of the problem assets division, BBVA has been one of the least active large Spanish entities in the sale of portfolios, and has barely transferred any portfolios of loans or homes.

Meanwhile, other financial groups such as CaixaBank, Sabadell and Bankia have taken advantage of the improvement in the market to sell €17,000 million worth of non-strategic assets.

Furthermore, the entity has not sought to make any alliances in the sector through the sale of part or all of its real estate arm, like other entities did, including Santander, CaixaBank, Bankia, Sabadell and Popular, amongst others. It did consider selling off its collections business and it appointed KPMG to coordinate that sale, but it ended up pulling out.

According to financial sources, this strategy means that the sales rate of its real estate assets is slower, but the bank would benefit in the event of a faster than expected economic recovery, as it would obtain more in return for its properties and real estate collateral. Nevertheless, the risk still exists that the opposite may happen.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Blackstone & Oaktree Compete For 5,000 Sabadell Homes

10 December 2015 – Expansión

Banco Sabadell is finalising what could be the largest block sale of homes by a Spanish bank in 2015. The Catalan entity is negotiating with the US funds Blackstone and Oaktree to transfer 5,000 rented homes, as part of Project Empire. Sources at the entity declined to comment on the operation.

Although there have been larger portfolio sales involving debt this year, all indications are that this sale will be the largest in the foreclosed asset segment, a space that only BMN and Bankinter have been active in so far in 2015. Popular considered it, but suspended its sale in the end and the portfolio sales that Bankia and Ibercaja currently have underway may be delayed until the first quarter of 2016.

Project Empire is an operation that Sabadell has been preparing for a long time and which has generated significant interest in the market. The 5,000 homes have a nominal value of €600 million. The fact that they are already rented out means that the most established funds in Spain have expressed their interest in them.

Such is the case of Blackstone, which owns the Anticipa platform – formerly CatalunyaCaixa Inmobiliaria – and which has purchased several bank portfolios. Meanwhile, Oaktree has unleashed itself as one of the major international investors in Spanish property, with the purchase of assets from Bankia, Ibercaja and FMS, the German bad bank.

Sabadell has reduced the volume of problematic assets on its balance sheet by €3,500 million since the start of 2014, down to €22,350 million by September 2015.

Original story: Expansión (by J. Z.)

Translation: Carmel Drake

Project Babieca: Bankia Puts €672M Portfolio Up For Sale

21 October 2015 – Idealista

Bankia has put another debt portfolio up for sale, worth almost €700 million and secured primarily by commercial assets (offices and shops), land and industrial assets. The project has been named ‘Babieca’ like the legendary horse of the hero El Cid Campeador.

Bankia is continuing with the process to reduce the real estate exposure on its balance sheet and to that end, has put another loan portfolio up for sale, a technique that has been used all over the world, during the process to clean up the financial sector. In this case, the so-called ‘Project Babieca’ is in the hands of the consultancy firm PwC, which is looking to place the portfolio, worth €672 million, with international investors, according to financial sources consulted.

The portfolio comprises 3 different sub-portfolios, but Bankia hopes to sell them all to a single buyer:

Portfolio Jimena: contains loans amounting to €115 million, primarily secured by land (specifically, 81% is guaranteed). This debt is shared between 9 borrowers, none of which have filed for insolvency to date.

Portfolio Elvira: contains debt amounting to €172 million, of which 78% is backed by commercial assets (offices and shops) and industrial assets. This debt is distributed between 40 borrowers, of which 18 have fallen into arrears.

Portfolio Sol: contains debt amounting to €384 million, of which 73% is secured by commercial assets. This tranche is spread between 30 borrowers, 22 of which are solvent.

According to the sources consulted, Bankia expects to receive non-binding offers from a handful of investors by the middle of October and to receive binding offers by the middle of November. In this way, it hopes to close the sale of this package in December.

If it manages to complete the sale before the end of the year, Bankia will be able to add the achievement to another sale it has already completed of another debt portfolio worth €1,300 million, which mainly contained doubtful mortgages to individuals. That package known as ‘Project Wind’ was awarded to the funds Oaktree and Chenavari (in July).

Bankia has also closed another operation this year, the sale to Bank of America of a hotel debt portfolio at the beginning of June. That operation, known as ‘Project Castle’ comprised 91 operations linked to 45 assets. 56% of the total portfolio related to doubtful debts.

In addition, Bankia has another package of real estate assets up for sale at the moment, the so-called ‘Project Big Bang’, which includes a portfolio of residential and commercial assets and land, worth €4,800 million. This is a sale that the bank is also looking to accelerate and one that would represent the largest sale of real estate assets since the real estate bubble burst.

Original story: Idealista (by P. Martínez-Almeida)

Translation: Carmel Drake

Blackstone To Buy €790M Of Property Loans From CaixaBank

22 July 2015 – Bloomberg

Blackstone Group LP is buying a portfolio of bad loans with a nominal value of €790 million ($858 million) from Spanish lender CaixaBank SA, according to two people with knowledge of the matter.

The debt is linked to newly completed residential units as well as land and homes under development, according to the people, who asked not to be identified because the deal is not yet complete. The sale of the portfolio, known as Tourmalet, is expected to close at the end of the week, the people said.

Spanish banks are seeking to sell off bad real estate debt that has weighed on their balance sheets since the financial crisis sparked a property crash. Lenders foreclosed on more than 70,000 homes in 2014 with Andalusia, Cataluña and Valencia hit the hardest, according to data from the National Statistics Institute.

The assets backing the CaixaBank debt comprise 88% residential property, 9% land and 3% commercial property, according to a sales document obtained by Bloomberg News. The assets are mainly based in Andalusia, Madrid, Castilla La Mancha and Cataluña, according to the document.

Blackstone, which is run by billionaire Stephen Schwarzman (pictured above) has become the largest private equity real estate investor.

Spokesmen for Blackstone and CaixaBank declined to comment on the deal.

Original story: Bloomberg (by Sharon R Smyth)

Edited by: Carmel Drake

Avalanche Of Portfolios

26 May 2015 

Entities such as Bankia, CaixaBank, Sabadell, BMN, Santander and Bankinter are selling mortgage debt portfolios, foreclosed assets, loans to developers and bad debt.

In recent weeks, Spanish banks have  inundated the market with portfolios full of troubled assets. The entities have contacted international funds to transfer unpaid debt and foreclosed assets worth 10 billion euros, according to financial sources consulted by the Expansión magazine.

The aim of the Spanish financial groups is to get rid of non-performing assets (NPAs) to make way for provisions, reduce default rates, allocate their resources to new credit and increase profitability.

The transactions contain a much larger real estate component than a few years ago, as the level of provisions in this segment has reached a point where banks can agree on prices with funds without  registering new losses.

The most active financial institution has been Bankia, which has revolutionized the market with the so-called ‘Big Bang project’, with which it plans to sell all foreclosed assets that remained on its balance sheet after the transfer to Sareb. In total, it has placed for sale 38,000 residential units (apartments, garages and storage rooms), worth 4.8 billion.

Along with this operation, which some competitors could replicate this year, Bankia was also the first to bring to market a portfolio of outstanding mortgage loans, within its ‘Wind Project’. This operation is in the final stage, awaiting binding bids in June. The portfolio consists of 4,300 mortgage loans with a nominal value of 900 million.

Growth

CaixaBank and Banco Sabadell are among the most active financial institutions, mainly due to their aim to clean up their balance sheets after years of strong inorganic growth in Spain based on mergers and acquisitions: CaixaBank with Banca Cívica, Banco de Valencia and now Barclays; Sabadell with CAM, Lloyds, Guipuzcoano, Banco Gallego and Caixa Penedès.

Along the same lines, CaixaBank has recently contacted funds to offer two possible deals: the Tourmalet Project, with 800 million in loans to developers, which could be the largest sale of a portfolio of this type so far in Spain; and the ‘More Project’ with 780 million in bad loans.

Meanwhile, Sabadell has started getting rid of 5,000 flats for lease, valued at 600 million euros, as part of its Empire Project. This entity has already sold two portfolios throughout 2015: the Project Auster –  800 million in defaulted loans, which were sold to the Aiqon fund; and the Cadi Project – 240 million in developer credit, which went to Pimco and Finsolutia.

Albeit on a smaller scale, Santander, BMN and Bankinter have also placed portfolios for sale on the market.  Santander, headed by Ana Botin, wants to transfer 170 million in hotel debt through the Formentera Project.

BMN has launched two projects: one with 160 million in bad loans, some mortgages – Project Pampa; and another with 100 million in apartments – Coronas.

Bankinter has recently announced the sale of a portfolio of 300 flats valued at 60 million.

Among the funds most interested in the new portfolios, highlighted are those who have purchased platforms such as Apollo (Altamira), Cerberus (Haya Real Estate), Centerbridge (Aktua), Blackstone (Anticipa) and Lone Star (Neinor). Other funds such as Oaktree and Sankaty are also breaking in quite strongly.

Translation: James Leahu

Amendment To Insolvency Law Creates “Bonkers Rule”

24 April 2015 – Expansión

The latest amendment to the Spanish Insolvency Act (Royal Decree-Law 11/2014, dated 5 September) has totally changed the rules of the game for investors in distressed debt.

Although it has gone relatively unnoticed amongst other novelties that have grabbed the attention of scholars (such the new cram-down majorities or the special provisions in the transmission of business units), the new rule to calculate the value of securities over the assets of insolvent companies is of great importance for the debt business.

Pursuant to this new rule, securities (basically mortgages and pledges) will no longer cover the initially agreed amounts in insolvency proceedings in those cases in which the receiver’s report had not been issued when the reform entered into force. The “privileged credit” is now capped at the (current) fair value of the collaterals, reduced by 10% to cover foreclosure expenses, minus the amount of any higher-ranking debt.

The new rule, without clear precedents in the main jurisdictions of our legal environment, has been received in some cases with suspicion and in others with shock by top foreign firms with ambitious investment projects in distressed debt. Especially by private equity funds and investment banks having set their sights on portfolios of secured debt owned by financial entities that need to “clean up” their balance sheets and reduce their exposure to the real estate sector (eg. Sareb); transactions that generally have a strong insolvency component. It is also a disincentive for the players of the incipient “direct lending” industry, the most genuine expression of the “shadow banking” phenomenon. These players are thus pushed to request additional guarantees or higher interest rates for refinancing (in a sector with a high cost of capital per se). With financial models ready and binding offers filed, such last-minute surprises are not welcome by potential new lenders. Certain City executives have baptized the amendment as the “bonkers rule” (“regla de locos”), and expressed their wishes for the Government to stop moving the goalposts during the game. As Ignacio Tirado ironized in Expansión (“Trotski y la reforma concursal”, 13 November 2014), it looks like there is a Trotskyist hiding among the Government’s ranks, because of the “permanent revolution” theory being applied to the Insolvency Act.

Leaving the pure economics and irony aside, it is shocking from a legal standpoint that a cornerstone of real estate law such as mortgage liability (with Registry publicity versus third parties) loses all effectiveness upon the filing for insolvency. We are aware that Insolvency Law is a law of exception, which requires a balancing of interests, but we do not believe that choking half a dozen basic tenets of mortgage law for the sake of the utopian “par conditio creditorum” principle (“all creditors should be treated equal”) contributes to enhance payment to creditors, or the continuity of the debtors’ business. On the contrary, it impairs the legitimate expectations of creditors to protect their claims, it contravenes the basic rules of legal certainty (Article 9.3 of the Spanish Constitution) and creates instability by giving rise to interpretative and transitory right issues.

The constant amendments to the Insolvency Law (two on average per year from its entry into force on 1 September 2004), including material changes such as the one we have analyzed, give an image of a fluctuating legal system, always a step behind economic reality, driven by the unchanged and stubborn percentage of companies that end in liquidation. No one has thought that the key could be to facilitate their recapitalization; not to put spokes in the wheels of investors.

Royal Decree-Law 11/2014, together with the so-called “second opportunity law”; RDL 1/2015, are being processed as new draft bills (“proyectos de ley”), so they are subject to new amendments. Maybe it would be a good idea to listen to the market and that legal certainty prevails over a questionable “insolvency justice”. Especially when two core objectives for economic recovery are at stake: attracting foreign capital and cleaning up banks’ balance sheets.

Original story: Expansión (by Antonio García García)

Translation: Dentons