Tag: Deposit Guarantee Fund

The Owners of Mywigo Buy 2 Buildings in Ciudad Gran Turia Complex in Valencia

26 July 2018 – Eje Prime

Cirkuit Planet is turning off the phone for a second to invest in real estate. The Valencian group, owner of the smartphone brand Mywigo, has reached an agreement with the Deposit Guarantee Fund to purchase two buildings in Valencia. The assets used to be owned by Banco Sabadell until 2016, which inherited the properties from CAM.

The operation has been led by Strongterra, the real estate arm of Cirkuit Planet, which is acquiring the last two buildings in the sale of the Ciudad Gran Turia complex, previously known as Ciudad Ros Casares, according to reports from València Plaza.

The sale is one step away from being signed and two Valencian partners have participated in it. Sabadell’s servicer, Solvia, has been the entity in charge of leading the sale of the properties, which have been in high demand in a booming real estate market such as Valencia’s.

The buildings, located close to the Vara de Quart Industrial Estate and the Gran Turia shopping centre, span 3,100 m2 each and comprise homes. In addition to that surface area, the transaction includes another 900 m2 in parking spaces. Nevertheless, the ground floor commercial premises in the two properties do not form part of the operation.

With 58 lofts, including twelve penthouses, the two residential blocks, are two of the brand new buildings that remain in Valencia. Although the exact price has not been revealed, the sale could be closed for around €4 million.

Strongterra plans to generate a return from this investment by placing the homes on the medium- and long-term rental market, to which end it is already holding negotiations with several hotel and apartment operators to obtain annual returns of between 8% and 10%, according to estimates from the company itself.

The company’s investment in Ciudad Gran Turia is its third in Valencia. Led by Jonatan Fatelevich and Maximiliano Gavilán, shareholders of Cirkuit Planet, Strongterra plans to group together all of the real estate properties owned by the two businessmen into the company and then convert it into a Socimi over the medium term.

Original story: Eje Prime

Translation: Carmel Drake

Sabadell Sells €9.1bn to Cerberus & €2.5bn to Deutsche Bank

19 July 2018 – Voz Pópuli

Banco Sabadell is selling its property to Cerberus and Deutsche Bank. The Catalan entity has agreed with the US fund to transfer 80% of its foreclosed assets, worth €9.1 billion for €3.9 billion. And is finalising the sale of €2.5 billion in real estate loans proceeding from CAM to Deutsche Bank, according to financial sources consulted by Vozpópuli. The entities involved all declined to comment.

The agreement with Cerberus, which this newspaper revealed, includes two of the four large portfolios for sale: “Challenger”, containing assets from the bank – around €5 billion – and “Coliseum”, containing foreclosed assets proceeding from CAM and with public aid from the Deposit Guarantee Fund (FGD).

According to a statement filed with the CNMV, Sabadell values those two portfolios at €9.1 billion and is selling them to a new company for €3.9 billion, equivalent to 42% of the initial appraisal value. Cerberus will own 80% of the new company and Sabadell the remaining 20%, in such a way that the bank will receive around €3.1 billion. The sale requires provisions of €92 million. The Solvia platform was left out of the agreement.

Agreement with Deutsche Bank

Meanwhile, the agreement with Deutsche Bank is for Project Makalu, another of the four portfolios that Sabadell put up for sale. It already sold the first, unsecured, portfolio – Project Galerna – to the fund Axactor.

Of the four portfolios, this is the largest containing loans backed by real estate collateral. And it is protected by the public aid that Sabadell received for the purchase of CAM, at the end of 2011. For that reason, this operation, which may be signed in the next few days, requires the approval of the FGD.

Deutsche Bank has fought off tough competition from Oaktree and Lone Star to acquire this portfolio. The price of the operation could reach between €800 million to €900 million, according to market valuations. The advisor on the sale has been KPMG.

The German bank is one of the typical buyers of these types of portfolio, although until now, it had not purchased anything of this magnitude in Spain. Last year, it closed two operations, one with Sareb amounting to €400 million and the other with CaixaBank amounting to €700 million.

Balance sheet

Following the imminent agreement with Deutsche Bank, the divestment team at Sabadell led by Jaume Oliu and Simon Castellá will have transferred €12.5 billion in problem assets to Cerberus, Deutsche Bank and Axactor.

This latest acquisition by Cerberus is the fourth largest in history in Spain, behind the sale of Popular’s property to Blackstone – €30 billion; the sale of BBVA’s property to Cerberus – €14 billion; and the most recent sale of CaixaBank’s property to Lone Star – €12.8 billion.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

BBVA & Sabadell Finalise Negotiations with the FGD to Sell their ‘Protected’ Toxic Assets

17 July 2018 – Expansión

The two banks are looking to remove their remaining damaged assets from their balance sheets. Sources in the sector calculate that the FGD will have to assume a cost of around €3.5 billion.

The Deposit Guarantee Fund (FGD) and BBVA and Sabadell are on the verge of reaching a definitive agreement that will allow the two banks to sell the majority of their damaged real estate assets that are protected by the FGD in order to clean up their balance sheets.

The fund will know exactly what the cost of the protection is and, in exchange, the banks will assume a greater percentage of the potential losses. Calculations from experts in the sector indicate that the cost that the FGD will have to bear amounts to around €3.5 billion.

The negotiations that have been going on for months between the heads of the FGD, led by Javier Alonso as the Chairman and Deputy Governor of the Bank of Spain, and BBVA and Sabadell, as well as the Ministry of Finance and the other financial institutions, are on the verge of reaching an agreement that will enable the two banks to get rid of the majority of their damaged real estate assets in operations similar to the ones undertaken by both Santander with Popular’s assets and more recently by CaixaBank.

The formula is the same: the two banks group together in a new company, or several new companies, the damaged assets and they sell the majority of the share capital in those companies to an investment fund, holding onto a minority stake that typically amounts to between 10% and 20%. In this way, the banks deconsolidate their real estate positions and their balance sheets look clean.

The problem that BBVA and Sabadell have had is that a large part of their assets to be sold are protected by a guarantee until 2021 whereby the FGD committed to bear the cost of 80% of any losses incurred, on the book value of those assets, when they were sold. This has been the case for the last few years (Sabadell has already sent three annual invoices to the FGD for losses over the last three years and BBVA has done the same for the last two years). And so that will continue until the end of the guarantee period.

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake

Spain’s Banks Set to Sell €120bn+ in Problem Assets This Year

4 July 2018 – Cinco Días

Spain’s banks are stepping down on the accelerator to put an end to the property hangover, although it will still take another two or three years for them to get rid of all of the excesses left over from the financial crisis. And that is not so much due to the leftover real estate portfolios but more because of the portfolios of non-performing loans, a caption that is continuing to augment the balance sheets of financial institutions.

In this way, the experts hope that this year will see a new record in terms of the sale of portfolios, for an approximate total of €120 billion, including the macro-operations from Santander and BBVA, announced last year but completed this year. Without them, the figure could amount to more than €51 billion, slightly higher than in 2017, which would increase to €80 billion if Sareb manages to sell a €30 billion portfolio.

Pressure from the European Central Bank (ECB) and the Bank of Spain, as well as that exerted by the market itself, is causing financial institutions to opt to sell their portfolios of problem assets in single operations wherever possible, rather than selling them off in a piecemeal fashion, in light of the prospects of rising prices.

Interest from opportunistic funds to invest in Spain and, also forecasts for even greater price rises for real estate assets in the future, are leading the banks to take advantage of the opportunity to clean-up their balance sheets between this year and next, just 10 years after the start of the crisis, explain several experts.

“The funds have large amounts of liquidity. Moreover, interest rates are still at historical minimums (still negative) and so financing can be obtained at very low prices, hence their interest in buying large portfolios of assets linked to property. They want to take advantage of the current climate”, explains Íñigo Laspiur, Director of Corporate Finance CBRE España.

All of the experts agree that the sale by Santander of Popular’s property to Blackstone, an operation announced last year, but ratified at the beginning of this year, for a gross amount of around €30 billion, was the trigger that caused the banks to decide to divest their portfolios on a mass scale.

Since that operation was ratified at the beginning of this year, to date, the banks have divested more than €62 billion in problem assets. That amount includes BBVA’s operation with Cerberus, the fund to which it sold €13 billion. Nevertheless, that operation is still pending approval from the Deposit Guarantee Fund (FGD) since some of it forms part of the Asset Protection Scheme (EPA), having proceeded from the former savings bank Unnim.

Financial sources maintain that there are currently operations underway amounting to another €21 billion, plus an addition €8 billion that may be closed over the coming months. The largest include the sale of around €11 billion in assets from Sabadell (of which €900 million has already been sold to Axactor), whose sale is scheduled for this month.

To these figures another €30 billion gross may be added from the sale of a Sareb portfolio this year if Pedro Sánchez’s Government approves that potential operation in the end. Santander has also put up for sale another €6 billion.

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: Carmel Drake

Santander Puts €6bn in Real Estate Assets Up For Sale

30 June 2018 – Cinco Días

Spain’s banks have put their foot down on the accelerator to end the property hangover once and for all. And there is no letup. On Thursday, CaixaBank announced that it had reached an agreement with Lone Star to sell it 80% of its problem assets, including its real estate platform Servihabitat, worth €7 billion altogether, which means that the fund will disburse around €5.6 billion for the property of the Catalan entity (based on the valuation as at October 2017).

This operation caused CaixaBank’s share price to soar on Friday, rising by almost 7%, and closing trading with an increase of 3.32%, to reach a value of €3.706 per share.

Sabadell also saw its share price soar on the stock market after closing the sale of a portfolio of non-performing loans worth €900 million to the Norwegian fund Axactor. That was Project Galerna, the smallest portfolio of the four containing foreclosed assets and non-performing loans that the bank has put up for sale, and whose deadline for the presentation of binding offers ended last Wednesday.

The bank’s objective is to close the sale of the four portfolios in a competitive process with a value of €10.8 billion over the next two weeks, before it presents its results for the first half of the year. Despite that, the Catalan bank will not be able to deconsolidate from its balance sheet more than €5 billion, equivalent to the largest portfolio comprising problem assets proceeding from the bank itself.

The other portfolios, whose contents came from CAM, cannot be removed from its balance sheet until the Deposit Guarantee Fund (FGD) reaches an agreement with the banks and Brussels so that the losses that these sales generate are not included in the public deficit. The stumbling block with these portfolios is that they are backed by an Asset Protection Scheme (EPA), in which the FGD initially assumes 80% of the losses generated by the operation, and Sabadell the remaining 20%, although the channel being considered to resolve this problem leaves those percentages to one side.

The market, on the news of the sale of the Galerna portfolio and the existence of seven offers in total for the purchase of almost all of the entity’s property, reacted with a rise of 4.7%. Although by close of trading the increase had dropped to just 1.74%, the third largest of the selective, to finish with a share price of €1.4355.

Santander has joined these operations, by placing up for sale foreclosed assets worth €6 billion, almost all of the property still held by Santander España. A spokesperson for the bank declined to comment on the operation.

The advisor on the sell-side is Crédit Suisse.

This macro-sale is the second largest operation that the group chaired by Ana Botín (pictured above) has ever undertaken and could be its last, given that this final disposal will allow the group to get rid of almost all of its real estate.

Indeed, Santander starred in the first macro-operation involving the sale of real estate assets one year ago. Last summer, it surprised the market with the sale in a single operation of all of the property proceeding from Banco Popular, around €30 billion, to Blackstone, with whom it created a company in which the US fund holds a 51% stake and the bank chaired by Ana Botín owns the remaining 49%.

That operation put pressure on the rest of the sector, which started to replicate the formula. The second to repeat the formula, in fact, was BBVA, with the sale of €13 billion to Cerberus.

Sareb is also now sounding out the market regarding the sale of gross assets worth around €30 billion (around €13 billion net). Nevertheless, the bad bank must wait for the green light from the Government to be able to carry out that operation, given that Sareb is an institution that depends on the Executive. It was created to unblock the former savings banks that received aid for their property, which is why it will try to maximise the value of any operation that is undertaken in order to return the public aid.

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

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

The Funds Bidding for Sabadell’s RE Have Until 27 June to Submit Their Offers

24 June 2018 – La Vanguardia

The deadline for the finalist funds to submit their bids to be awarded Banco Sabadell’s four portfolios comprising problem assets, whose combined value amounts to almost €11 billion, will close definitively on Wednesday, 27 June, the date on which the entity will have to choose the winners, according to sources close to funds consulted by Europa Press.

The entity chaired by Josep Oliu is looking to divest its Challenger and Coliseum portfolios, which amount to around €7.5 billion and comprise foreclosed assets (REO) and Makalu and Galerna, worth €2.5 billion and €900 million, respectively, comprising non-performing loans (NPLs).

Nevertheless, according to explanations provided by market sources, Sabadell is only going to be able to deconsolidate the largest portfolio from its balance sheet this year, the so-called Challenger portfolio (worth around €5 billion). The others will have to wait as they need to receive the green light from the Deposit Guarantee Fund (FGD) since the properties that constitute them proceed from the former CAM – Caja de Ahorros del Mediterráneo – a process that could take months (…).

The main international funds specialising in distressed debt and assets in risk of default are bidding for these portfolios. They are proposing significant discounts to their nominal values and their recoveries depends on the guarantee or collateral.

The strong investor appetite for Sabadell’s toxic property comes in a context in which political uncertainty is continuing to rage on the Old Continent. Cerberus, Blackstone, Lone Star and Oaktree are some of the finalist funds to be awarded the first two portfolios, whilst Deutsche Bank, Bain Capital, Oaktree and CPPIB are going to compete for the assets in the other two, according to sources at the funds and banks, speaking to ‘El Confidencial’ and ‘Vozpópuli’.

Significant reduction in real estate exposure

With the deconsolidation of its largest portfolio alone, Sabadell’s real estate exposure would fall below the €10 billion threshold, whilst the sale of all four portfolios would reduce its balance to around €4 billion, according to the accounts published by the bank for the first quarter of 2018. Thus, once the transactions have been completed, Sabadell’s accounts will have a much healthier balance sheet.

As at 31 March 2018, the entity had €14.9 billion in problem assets, which represented a decrease of 17.6% compared to the end of the same period a year earlier, when the figure amounted to €18.1 billion. The coverage ratio of the problem assets amounted to 55.2%, after applying IFRS 9, with a doubtful coverage ratio of 56.6% and a foreclosed asset coverage ratio of 53.7%. Similarly, the ratio of net problem assets over total assets stood at 3.1% (…).

A source of liquidity for the banks

In this way, Banco Sabadell is following in the footsteps of other entities such as Santander, BBVA and CaixaBank in the reduction of its heavy backpack of toxic assets, which the financial crisis left on their balance sheets (…).

Original story: La Vanguardia 

Translation: Carmel Drake

Project Ágora: CaixaBank Sells €650M NPL Portfolio to Cerberus

21 June 2018 – Voz Pópuli

CaixaBank is getting serious with the digestion of its real estate. The Catalan bank has just closed its first major divestment of 2018 and is analysing another possible large-scale operation to be completed in the second half of the year, according to financial sources consulted by Vozpópuli.

The sale that has just been announced is Project Ágora, a €650 million portfolio whose transfer has been agreed with Cerberus. According to the same sources, the US fund and CaixaBank have already signed a pre-agreement and are now negotiating the small print of the deal. Cerberus could pay around €200 million, according to market estimates.

Project Ágora comprises around 150 unpaid loans from large companies backed by retail premises, offices, industrial land and residential assets.

Strategic revision

Following this sale, the market is expecting CaixaBank to close a macro-operation during the second half of the year. The repurchase of Servihabitat, announced two weeks ago, is seen as a preliminary step, since that is what Santander did with Aliseda before it sold Popular’s real estate to Blackstone.

The sources consulted indicate that no process is underway yet, although the entity is reportedly working on some numbers and doing some preparation work in that regard. The entity led by Gonzalo Gortázar (pictured above) is being advised by consultancy firms, including KPMG. The Madrilenian banker wants to know whether undertaking an operation such as Quasar (Popular-Blackstone) or Marina (BBVA-Cerberus) will require it to recognise any new provisions.

CaixaBank has €14 billion in foreclosed assets on its balance sheet, worth €5.8 billion. That represents a discount of 58%, according to its accounts for the first quarter. Santander sold Popular’s real estate at a discount of 67% and BBVA sold its assets at a discount of 62% (…).

Gortázar’s team wants to avoid the market fixating on CaixaBank following the sales undertaken by Santander and BBVA, and the operations that Sabadell has underway.

The commitment from Cerberus

With Project Ágora, Cerberus is continuing to grow its real estate business in Spain. The fund led in Spain by BBVA’s former Finance Director, Manuel González-Cid, already purchased a portfolio from CaixaBank at the end of last year – Project Egeo – and is completing the purchase of 80% of BBVA’s real estate for €4 billion. For this, the comments to be issued by the Deposit Guarantee Fund (FGD) in the next few weeks will be critical.

In addition to the portfolios that it has been buying, Cerberus has a large part of its Spanish real estate interests in Haya Real Estate. After trying, unsuccessfully, to debut that entity on the stock market before the summer, the fund is negotiating its key contract and/or a possible acquisition of assets with Sareb. The fund certaintly has a great deal at stake with that operation.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Spain’s Banks Race Against the Clock to Sell Off Their Problem RE Assets

28 May 2018 – Eje Prime

The banks are facing a new record. The entities have cut their problem assets almost in half over the last four years, but now they are trying to get rid of thousands of properties in record time to keep the supervisor happy, along with investors. The Bank of Spain warned just this week that the volume of impaired assets continues to be high, given that foreclosed assets amount to €58 billion and doubtful loans still amount to almost €100 billion, something that concerns the ECB and penalises the sector on the stock market.

Specifically, Spanish banks’ problem assets amounted to €152 billion at the end of 2017, a very high volume, but 46% lower than the €280 billion registered as at December 2013.

In addition to the cost that maintaining these assets on the balance sheet has for entities, they also prevent them from allocating resources to other activities more in keeping with the banking sector that would generate higher returns, which worsens the problems of returns in the sector especially at a time of very low interest rates.

In 2017, in the face of clear pressure on the banks to significantly reduce their problem assets, the Spanish market resurfaced to account for approximately 50% of the European market for the sale of problem assets, recall the experts.

The announcement by Cerberus of its purchase of 80% of BBVA’s problem assets and the acquisition by Blackstone of 51% of Aliseda and of Popular’s non-performing assets clearly marked a turning point.

And currently, taking into account the portfolios that are up for sale and the forecasts for the reduction in non-performing assets in the plans of many Spanish banks, a high volume of transactions is also expected in 2018.

The entities are on the case

Sabadell is planning to decrease its non-performing assets by €2 billion per year until 2020, although, depending on investor appetite and the agreements with the Deposit Guarantee Fund (FGD), that figure may rise considerably in 2018, explain sources at Funcas.

Meanwhile, in its strategic plan for 2018-2020, Bankia is forecasting the sale of €2.9 billion problem assets per year, even though the entity got rid of much of its real estate hangover with the creation of Sareb, the bad bank.

The placement on the market of this significant volume of assets is not only limited to the large entities; it is also involving smaller firms such as Ibercaja and Liberbank, which are also planning to divest assets.

In the case of the former, its plans involve cutting its problem assets in half between now and 2020, which translates into a decrease of around €600 million per year, whilst Liberbank is looking at reductions of €900 million per year until 2020.

For 2018, Santander has set itself the objective of €6 billion, whilst Sareb is aiming for €3 billion, which shows the real commitment that the entities have to cleaning up their balance sheets and to keeping the supervisor, and the markets, happy. Now they just need to deliver.

Original story: Eje Prime

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