The funds need to place their bids for the default credits of NCG blindly.

A new disagreement between the Frob and the foreign funds due to the default credits of NCG Banco. It seems that the five investors interested in the 4000 million in credits will not be able to carry out their own due diligence, as explained to Expansion by some of these funds. This would imply making offers without fully knowing about the quality of the assets. “This is like walking blindly”, investors assure.

In exchange, the Frob and NCG will provide the information which has been previously analyzed by EY, based on which the investors will need to present their offers. This is not the usual procedure in the sale of default credits. Investors have demanded some sort of guarantee in exchange to cover their position in case the information they have received is not correct. This request has not been accepted.

The Frob has taken this decision in order to speed up the process and because it considers that the foreign investors already know the situation of the balance sheet of NCG, after months of analysis.

The funds have the impression that the Frob is using this process in parallel to the auction of NCG as a way to put pressure on banks so that they will not give a zero value to the default credits of the group. The Frob has opened the door for banks and funds to go together to the auction of NCG, thus maximizing the selling price.

The first disagreement between the funds and the Frob started in the auction of UGAS, the bad bank from NCG, where one of the pieces was these default credits. After months of analysis and negotiations, the Frob decided to call off the auction in the summer, surprising the three final funds: the U.S. Fortress and Centerbridge and the Norwegian Lindorff. The decision was taken after Spanish banks pressured to prevent the sale of NCG in different pieces before the auction started. But once it had started, the Frob decided to offer the 4000 million Euros in default credits to the three funds as a measure to compensate them for the failed auction of UGAS and to increase the value of NCG. This operation has awaken so much interest in the market that the fund lead by Antonio Carrascosa has opened it up to at least two more investors, Elliot and Marathon. The latter would invest jointly with Savia, from Javier Botín, son of the president of Santander.

The five funds interested will need to present their offers on the default credits before the 13th December, in parallel to the auction of the Galician group. Within this one, there are four interested banks –  Santander, Caixabank, Banesco and  BBVA –  and five funds, although who seem to take it more seriously are Guggenheim Partners, WL Ross and JC Flowers. Most of them ask for public funding, something which was hinted by Economy this week.


Source: Expansión

The Banking Restructuring Fund (FROB) revises the affiliated companies of public banks in order to transfer them to Sareb.

The Frob is analyzing the scheme of shares held in developing companies by those banks with public aid in order to agree their transfer to Sareb, the bad bank. The eight groups which have received state aid (BFA-Bankia, NCG, Catalunya Banc, Banco de Valencia, BMN, Liberbank, Caja España Duero and Caja 3) sold in December and January nearly 50.500 million Euros in credits to developers and awarded properties to Sareb. However, the third real estate risk focal point still remains in their balances: their developing subsidiaries, more than 400. Among them, their shares in listed companies such as Metrovacesa and Realia.

The Frob is revising the features of the different real estate subsidiaries in order to decide which shares comply with the requirements to be acquired by Sareb. The institution presided over by Antonio Carrascosa is analyzing different criteria, among them, if the affiliated developing company has a high number of properties with a net value in books over 100.000 Euros in its balance or if the participation of the bank in the subsidiary is an effective channel for the institution to carry out its building and real estate developing activity in Spain.

Once the number of assets to be transferred has been established, the Bank of Spain will set the transfer price of the shares, as already done last year, when credits and properties were transferred. The reference will be the net value in books of the real estate subsidiaries.

Although the process is still in the stage of analysis, several sources within the market declare that the transfer would take place around the summer. Those same sources also point out that the volume of assets that would be transferred to Sareb would not oblige the company to extend its capital in order to maintain an adequate solvency rate. That is, Frob, that controls 45% of the bad bank, and the private shareholders (nearly 30 banks and insurance companies) would not need to do more payments.

Sareb has currently 50.449 million Euros in assets in its balance. The shareholders fund reaches 4800 million Euros, and therefore the capital rate is 9,5%. The Frob has declared in the last few months that Sareb can operate with levels of 8% of own funds, which are considered conservative and prudent. With this reference, the bad bank would have a financial cushion of one and a half points of solvency, equivalent to 800 million Euros. It could increase its balance in another 10.000 million Euros (up to 60.000 million Euros), maintaining a solvency of 8%.

The existing financial cushion, as well as the nature  of Sareb, a company which is being liquidated, will avoid a new need of capital, not only now but during its fifteen years of life, according to the mentioned sources. The balance of Sareb will be reduced once the assets start to be sold. This means that with the same volume of own funds, the solvency rate will gradually increase until 2027, as long as the losses do not boost and the forecasts on gains are fulfilled.

This dynamic will be a key point in order to comply with the profit target of the bad bank, between 13% and 14% annually, according to the revised business plan approved by the board in March. Once credits, properties and affiliated companies start being liquidated, Sareb will have less financial expenses and more money available to remunerate its capital.

Bancaja Habitat bought land with an overprice 50 times higher.

False valuations, fraudulent acquisitions of assets and irregular transfers of hundreds of millions of Euros. These are some of the points included in the lawsuit filed by the Banking Restructuring Fund (Frob) against former managers of Bancaja and Banco de Valencia and the business man Ramón Salvador. According to it, Bancaja Habitat would have paid an overprice 50 times higher in order to acquire land not intended for building from the accused business man.

“Several million Euros have been paid for plots that had nearly no value, or 98% lower than the one included in the deeds, due to the fact that they had been valued as perfectly usable”, the lawsuit declares. “Most of the acquired assets were subject to the compliance with the building plans, the approval of building and subdivision projects or they were land not intended for building pending to be part of a Housing Development Partial Plan”, the document drafted by the lawyer appointed by Frob, Carlos Gómez-Jara, adds.

(…) The Frob demands that all the accused should pay a joint bail of 226 million Euros, based on the presumed losses inflicted on Bancaja and Banco de Valencia.

The lawsuit also denounces the existence of “false valuations” in operations between the Valencian group and Ramón Salvador.

(…) The Fund also denounces that some of the operations agreed between Salvador and the Valencian institutions were carried out without being approved by the board of administration of the bank and the savings bank.(…)

The lawsuit insists that these presumed irregular activities are even more serious as they took place when the real estate bubble had already burst. It also adds that “it is even more surprising that some of these operations took place the same year that Banco de Valencia was being placed in administration of the Bank of Spain”. (…)

Source: Expansión

Sareb hires the financial director from Frob.

Gomez will be responsible of the Finance area of the bad bank, one of the key positions along with the director of risks.

Since 2009, Gomez has held the position of financial and strategy director of Frob, where he participated in the creation of the institution that acts as the authority for the credit institutions in Spain. He was also a coordinator in the constitution process of Sareb.

The bad banks has also reinforced its managing team with the hiring of Francisco Gonzalez Paz as responsible for communication.

He has a degree in Journalism by the Universidad CEU San Pablo in Valencia and has an experience of more than 15 years in economic and international press within the EFE agency. Up to now, he was the head of the area of Finance and Markets of the public agency. (…)

Source: Expansión