Tag: Grove

Axactor & Grove Compete to Acquire Sareb’s Largest NPL Portfolio

23 July 2018 – Voz Pópuli

The Norwegian investment fund Axactor and the US fund Grove, which is in the process of merging with the British firm Cabot, are competing to be awarded a non-performing loan portfolio with a nominal value of €2.335 billion by Sareb. The portfolio is the largest of its kind to be sold by the company chaired by Jaime Echegoyen (pictured below), according to financial sources consulted by Vozpópuli.

Sareb has recently received binding offers from the two aforementioned funds, as well as from Kruk, a Polish company specialising in debt recovery. Nevertheless, the proposal made by the latter was well below those submitted by the other two. According to the sources consulted, the Norwegian fund, which recently acquired a €900 million portfolio from Sabadell, as this newspaper revealed, looks to be the favourite to win the auction this time around.

The portfolio in question, which forms part of Project Dune, regarding which Sareb is being advised by KPMG, comprises unsecured non-performing loans. In fact, the assets are mortgage tails – loans that have not been repaid following the execution of their corresponding mortgage contracts – from small- and medium-sized property developers.

In this specific operation, the offers that the interested parties have presented reflect significant discounts, which may even amount to 99% of the nominal value of the portfolio, with the aim of trying to recover the maximum possible amount of the debt, which is no longer secured by any collateral.

Gains

In any case, whatever Sareb obtains for this portfolio will represent a gain for the entity, given that all of the loans, which are considered almost irrecoverable, have already been fully provisioned. The completion of the operation will happen in the month of September, at the earliest, according to the sources consulted.

Last week, Sareb shelved the block sale of between €20 billion and €30 billion in real estate assets due to the high cost of the operation. In fact, the Board of Directors of the entity known as the bad bank decided not to undertake that operation for the time being, due to the capital hole that the sale of those assets would have generated for the acquiring fund, which require higher discounts than individual investors.

That deal was called Project Alpha and Goldman Sachs had been working on it for months, to determine how, when and to whom the portfolio could be sold. Sareb was also supported in that deal by the consultancy firm CBRE and the audit firm EY (…).

Original story: Voz Pópuli (by Pepe Bravo)

Translation: Carmel Drake

Project Makalu: Sabadell Puts €2.5bn Portfolio Up For Sale

21 March 2018 – Vozpópuli

Banco Sabadell is stepping on the accelerator to complete its balance sheet clean up as soon as possible. After months of negotiations with the Deposit Guarantee Fund (FGD), the Catalan entity has decided to place on the market its first large portfolio proceeding from CAM’s Asset Protection Scheme (EPA). In this way, it has distributed information to investors about Project Makalu, comprising €2.5 billion in assets from the former Alicante-based savings bank, according to financial sources consulted by Vozpópuli.

This operation comprises foreclosed assets and unpaid loans from companies and individuals covered by the EPA. It follows another portfolio that has been on the market for a few days, Project Galerna, comprising €900 million in non-performing loans.

KPMG is advising Sabadell on both operations, which together comprise assets and loans worth €3.4 billion.

The group chaired by Josep Oliu has been negotiating with the FGD for months to try to kick-start these operations. The aim is that they will be followed by two more portfolios taking the total value of the assets for sale to €12 billion and whereby reset the entity’s real estate calculator. The issue is not simple because the sale of these loans may generate a hole for the Fund that would impact the State deficit.

Strategic plan

The Catalan entity announced at the recent launch of its strategic plan in London that it maintains the objective of reducing its exposure to problem assets at a rate of €2 billion per year. With the sale of Project Makalu alone it would more than exceed that goal.

The bank held €15.2 billion in problem assets at the end of 2017, but the forecasts indicate that that figure will fall below €9 billion by 2020: €4 billion in doubtful loans and €5 billion in foreclosed assets. And that is without taking into account the divestments that are now being worked on with the FGD.

Project Makalu is the fourth largest portfolio of problem assets ever to be put up for sale by a Spanish bank, behind only Popular’s Project Quasar, amounting to €30 billion, purchased by Blackstone; BBVA’s Project Marina, amounting to €13 billion, acquired by Cerberus; and Project Hercules, amounting to €6.4 billion in mortgages from Catalunya Banc, which was bought by Blackstone.

Meanwhile, Project Galerna is similar to Project Gregal, which Sabadell sold less than a year ago to three funds: Grove, D. E. Shaw and Lindorff. That portfolio comprised loans linked to consumers, without real estate guarantees, which had already been fully written off, and so all of the proceeds from the sale were recorded directly as gains.

Precedents

Besides Gregal, Sabadell closed two other major operations last year: Normandy, comprising €950 million in property developer loans, which was acquired by Oaktree, and which also proceeded from CAM’s EPA; and Voyager, comprising €800 million, which was purchased by the largest pension fund in Canada.

The latest operation launched by Sabadell joins others recently placed on the market by Sareb, BBVA, Cajamar and Kutxabank.

Original story: Vozpópuli (by Jorge Zuloaga)

Translation: Carmel Drake

How Will Santander Get Rid Of Popular’s RE Assets?

13 June 2017 – Expansión

Double approach / The bank will put some large portfolios on the market to sell them to opportunistic funds and will also transfer some of the assets to Metrovacesa, in which Santander is the majority shareholder. 

Last year, the real estate nightmare stopped causing headaches for Santander. The risk accounted for just 2% of the balance sheet of its Spanish subsidiary (…). Between 2012 and March 2017, its volume of damaged assets fell by 60% in net terms, according to its own numbers.

However, the arrival of a block of RE exposures worth €36,800 million from Popular will force its managers to roll their sleeves up once again. Nevertheless, this is happening at a point in the real estate cycle that, a priori, is much more favourable.

Santander’s intention is to cut Popular’s toxic assets in half within a year and a half, with the aim of reducing the balance to an immaterial amount within three years.

Santander will go to the market over the next few months to sell significant batches of assets to opportunistic funds that are dedicated to this business. These divestments tend to be made at a loss because the funds pay low prices. Santander starred in one of the fifteen large operations closed in 2016, with its sale of a portfolio to Grove and Lindorff. (…).

Popular did not have this solution available to it because of the low provisioning level that it had covering these assets. As a result, any such operation would have made the losses in its income statement even worse. In fact, during the whole crisis, Popular only made public two transactions, which together amounted to €621 million. The only channel that it could afford to use was retail.

Digestion

By contrast, Santander can afford to allow these divestments. One of the objectives of the €7,000 million macro-capital increase that it is going to undertake is precisely to increase the level of provisions for Popular from 45% to 67%. The average level in the sector stands at 52%. In the case of non-performing loans, the coverage will jump from 55% to 75%.

These future sales will lead to an intensification of this market, which last year moved €15,600 million, according to data compiled by KPMG. Since the start of the crisis, total divestments through this channel amount to almost €100,000 million.

Metrovacesa

Santander has another door open for providing a rapid exit to Popular’s real estate assets and its called Metrovacesa. Santander is the property developer’s largest shareholder, with 72% of the capital, in addition to Popular’s stake.

Ana Botín’s team already used this channel last year to transfer risks and it is likely that it will use it again with Popular, especially for its land. Santander also owns a stake in the Socimi Testa Residencial, which is scheduled to debut on the stock market in 2018. That company owns 8,064 rental homes, which could be supplemented with the buildings owned Popular that are most susceptible to rent. (…)

One of the first decisions taken by Ana Botín following the purchase of Popular has been to appoint Javier García Carranza, the Head of Santander’s Real Estate Restructuring area, to Popular’s new Board of Directors.

After several years of high provisions to cover the real estate assets, the large entities consider that the coverage level is now sufficient. The vast majority of the current costs are maintenance related. In other words, they stem from the payment of municipal taxes, neighbourhood costs, etc. (…).

Original story: Expansión (by R.Lander and R.Ruiz)

Translation: Carmel Drake

Popular Puts €500M Distressed Asset Portfolio Up For Sale

21 April 2017 – El Mundo

Banco Popular, the Spanish entity that is under the most pressure from the ECB to accelerate the cleanup of its balance sheet, is starting to debut on the wholesale market, in search of investors interested in its portfolios of distressed assets. The entity has committed to eliminating €15,000 million from its balance sheet by 2018, which represents almost half of its total risk.

The latest move has been to put a portfolio of distressed assets up for sale, amounting to €500 million. The portfolio is sparking potential interest amongst funds that specialise in buying portfolios at low prices to generate returns from them later through the recovery of their value or their resale. Banco Popular told this newspaper that it does not have any portfolios of that kind up for sale and that it only publicises such operations once they have been completed, however, two financial sources consulted separately, confirmed otherwise.

The portfolio up for sale is the largest, by volume, that the entity has marketed since it began its timid cleanup process at the end of 2016. In January, whilst the entity’s former Chairman was in the middle of being replaced, Popular sold a portfolio of debt, amounting to €200 million and secured by hotel assets. It also placed a €400 million portfolio, secured by homes, parking spaces and storerooms. The purchasers in those cases were the investment funds Apollo and Blackstone, respectively.

The sense in the financial markets is that this move by Banco Popular will be the first of many whereby the entity will try to offload new portfolios of assets in order to fulfil the “ambitious and realistic” strategies that the regulators have been requiring of it since 20 March to clean up its balance sheet and achieve the established capital and risk coverage ratios.

Changes in the sector

In fact, Popular is far from the only entity to be placing portfolios of this kind on the market. So far this year, entities such as Bankia, Sabadell, Deutsche Bank and BBVA have placed €1,600 million with specialist funds such as Blackstone, Grove and Oaktree. (…).

Original story: El Mundo (by César Urrutia)

Translation: Carmel Drake

Sabadell Sells €1,000M NPL Portfolio To Grove & Lindorff

9 May 2016 – Expansión

Banco Sabadell is accelerating the clean up of its balance sheet / Over the last three years, the bank has sold non-performing debt portfolios worth more than €5,300 million.

Banco Sabadell is establishing itself as one of the most active entities in the sale of large debt portfolios, as it continues to clean up its balance sheet. The bank chaired by Josep Oliu has just closed its first major operation of the year, known as Project Corus, involving the sale of €1,000 million in non-performing loans, which it has already fully provisioned. This is the largest portfolio that Sabadell has brought onto the market to date; none of its previous operations have exceeded €800 million.

The portfolio has been acquired by a consortium comprising Grove Capital Management and Lindorff, which have paid around 5% of the global amount of the loans acquired, in other words, around €50 million. This figure will be recorded as pure profit in Sabadell’s income statement.

The Corus portfolio comprises unsecured doubtful loans relating to consumer debt and credit cards. Grove has acquired €800 million of the portfolio, which it will now manage to try to recover the maximum amount possible. The fund is owned by Blenheim Chalcot and Encore Capital Group – one of the largest collection companies in the world – at the end of 2015, it bought another NPL portfolio, containing €400 million in doubtful debts, from Santander.

Background

Meanwhile, the Norwegian company Lindorff has purchased the remaining €200 million of the Corus portfolio. This fund has also just acquired 94% of the real estate company Aktua, which manages homes and debt on behalf of BMN, Ibercaja and Santander.

It is not the first time that Lindorff has acquired assets from Sabadell. In 2014, the company acquired the bank’s debt recovery division for €162 million, and incorporated the workforce into its own business.

Over the last three years, the bank led by Jaume Guardiola has transferred debt portfolios exceeding €5,300 million to clean up its balance sheet. (…).

By amount, Project Corus is the largest portfolio that Sabadell has put up for sale to date, but it will soon be overtaken by Normandy, a portfolio containing €1,700 million of doubtful real estate loans that the bank is currently evaluating.

Meanwhile, Sabadell has already put another operation on the market, known as Pirene and advised by KPMG, containing €460 million of problem assets linked to property developers.

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake

Santander Sells €400M NPL Portfolio To Grove

28 December 2015 – Expansión

Santander is cleaning up its balance sheet. Within the last few days, the entity chaired by Ana Botín (pictured above) has completed the transfer of a portfolio of non-performing loans amounting to €400 million to the Grove group, a subsidiary of the US entity Encore.

The operation represents one of the last divestments in the banking sector in 2015 after those signed (in recent weeks) by Bankia, which sold €650 million corporate loans to Deutsche Bank; and by CaixaBank, which sold €800 million doubtful developer loans to TPG and Goldman Sachs.

Santander’s sale forms part of Project Hungaroring, which initially included €700 million non-performing loans to SMEs. In the end, the perimeter has been reduced to €400 million.

This is one of the largest operations involving the sale of non-performing (unsecured) loans in 2015, given that entities have been more focused on getting rid of assets linked to the real estate market, such as mortgages and doubtful loans to property developers.

Deceleration

As a result, during 2015, non-performing loan portfolios worth around €3,000 million have been transferred in 2015, such as the portfolio sold by Sabadell (€800 million) to Aiqon; the portfolio sold by CaixaBank (€780 million) to Cerberus; the portfolio sold by Cajamar (€640 milion), also to the US fund; the portfolio sold by Ibercaja (€200 million) to Seer Capital; and BMN’s portfolio (€350 million), which has just been sold to Link Financial. Popular was also recently sounding out the sale of a portfolio worth just over €300 million.

Even so, the figure of around €3,000 million in non-performing loan sales in 2015 is significantly lower than previous years. In 2013, €12,000 million of loans were transferred and in 2014, the figure reached around €15,000 million.

Project Hungaroring is the first major operation performed by Santander this year. The group launched two projects during the first half of the year: Project Formentera, with €170 million of hotel debt; and Project Mamut, with €800 million overdue mortgages. Nevertheless, the latter was suspended during the summer following the change in the market due to the Greek and Chinese crises.

Santander had a default rate of 6.61% in Spain at the end of September, compared with an average of 4.5% for the group as a whole. Its real estate balance sheet has grown by €5,600 million in the last year, due to the inclusion of its stake in Metrovacesa.

The financial institution began to divest from property in 2013, with the sale of 85% of its real estate platform Altamira, to the US fund Apollo for €664 million.

In order to continue its sale of these assets, Santander has hired the Spanish director of Morgan Stanley, Javier García Carranza, as the Deputy General Manager and Head of Restructuring, Real Estate, Investments and Private Equity.

Buyer

The purchasing fund, Encore, is one of the main groups operating in the recovery business on the global level. It is conducting the operation through its subsidiary Grove, which recently acquired a loan management platform in Spain, called Lucania. Encore is listed on the Nasdaq with a market capitalisation of US$ 760 million (€695 million).

Another company owned by this US group, Cabot Credit Management Group, also made its first investment in Spain recently, with the purchase of Gesif from the US fund Elliott.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake