Sareb Expects To Pay Its Bondholders A €1,000M Coupon

13 May 2016 – Expansión

Sareb’s shareholders are fully aware that they will never receive any dividends. Neither the private institutions, mostly banks and insurance companies, which own 55% of the so-called bad bank; nor the State, which controls the remaining 45% stake through the FROB (‘Fondo de Reestructuración Ordenada Bancaria’ or Fund for the Orderly Restructuring of the Banking Sector) expect to receive any returns on their capital, in accordance with the company’s original business plan.

But the institution led by Jaime Echegoyen (pictured above) plans to repay them by other means. Sareb is hoping to pay its shareholders a coupon of €1,000 million, over its remaining twelve years of life, in return for the subordinated debt that they subscribed to, to get it on its feet, according to sources close to the bad bank.

In order to provide the company with sufficient own funds, the shareholders subscribed to convertible subordinated bonds amounting to €3,600 million, which were added to the €1,200 million of pure capital that had been contributed by its investors, to take its own funds to €4,800 million.

Accounting circular

The new accounting framework established by the Bank of Spain, which came into force last year, forced Sareb to individually appraise all of its assets and adjust them to reflect market value and, in this way, to undertake a thorough clean up (of its balance sheet), which resulted in significant losses and additional capital requirements.

To cover those without resorting to a capital increase, the company capitalised debt amounting to €2,170 million. In this way, only the remaining subordinated debt holders (who hold €1,429 million) will end up receiving the coupon.

Before the shareholders receive the interest amounting to 8% p.a., Sareb will have to generate sufficient consolidated profit before tax and cash and, also, have paid the interest rates on the senior bonds that it issued to the former rescued savings banks in return for the foreclosed assets and property developer loans that they transferred to it.

Two annual payments

After the shock of the accounting circular, the so-called bad bank is confident that it will be able to leave behind its losses and break even in 2017, before generating profits in 2018, the date when the bondholders will begin to receive the annual coupon for the first time.

Nevertheless, their remuneration would not necessarily be reduced in the event that Sareb has to wait until 2019 generating any profits, given that the amount of interest accrued in 2018 would be rolled into the receipt for the following year. Thus, on the payment date, they could receive the annual payment for the current year as well as for the previous year. They may not receive more than two payments.

Santander and CaixaBank

The conversion of debt into capital, approved by Sareb’s General Shareholders’ Meeting at the beginning of May, did not affect the subordinated debt stakes held by each one of the bondholders, most of whom are also shareholders. As such, and until the operation goes ahead, Santander is the largest private bondholder, with a 16.6% stake, amounting to €237 million.

The next largest bondholder is CaixaBank, which holds 12.2% of the debt, worth €174 million, followed by Sabadell, with a 6.6% stake (€94 million) and Popular, with a 5.7% stake (€81 million). Meanwhile, the State holds debt amounting to €656 million, through the 45.9% stake that it owns through the Frob.

Original story: Expansión (by A.Crespo and S.Arancibia)

Translation: Carmel Drake

Sareb Reduces Its Assets By Just 6% In 3 Years

9 May 2016 – El Economista

Sareb has reduced the number of assets it owns by just 6.1% since its creation at the beginning of 2013. In the last three years, the company chaired by Jaime Echegoyen has decreased its volume of properties and loans by 12,091 units, representing 6.1% of the total, and so still held 186,120 assets at the end of last year, according to its annual report approved by the General Shareholders’ Meeting.

The firm, which was created using the toxic assets of the entities that received state aid, has twelve years left to sell off its remaining assets, which are valued at €43,000 million, after the sales it has already completed and the impairment in its appraisal values as a result of price decreases.

The small reduction in the number of loans and properties is due, in part, to the transformation of the portfolio into more liquid assets. Since it was created, Sareb has been converting loans in homes and land, so as to bring them onto the market more quickly in the face of their non-payment. In this way, the volume of financing lines to property developers has decreased by around 10,000, to just over 80,000, whilst the number of properties has been reduced by around 2,000, despite the fact that its divestments since the creation of its semi-public capital exceed 30,000.

Sareb’s General Shareholders’ Meeting approved the accounts from last year, which are weighed down by the new provisioning circular. Moreover, it authorised the exchange of subordinated debt for capital to strengthen its solvency, after recording significant losses in prior years. The company will convert €2,170 million in total. Following this operation, the State – through the Frob – will slightly strengthen its stake, since it holds more debt that the other shareholders. It will go from owning 45% of the shares to 45.9%.

In addition, several insurance companies will acquire small stakes in the company’s share capital, given that, until now, they only held subordinated bonds. The remaining shareholders – the banks – will see their shareholdings diluted slightly. Santander will continue as the main private shareholder.

Original story: El Economista (by F. Tadeo)

Translation: Carmel Drake

Phoenix Buys Hotel Intercontinental In Torre Pacheco

18 January 2016 – La Opinión de Murcia

A Chilean group has acquired the five-star Hotel Intercontinental La Torre from Polaris World, the property developer from Balsicas, which filed for liquidation following the suspension of payments that ended with the transfer of the majority of the homes that it had constructed in urbanisations in Murcia to Sareb.

The new owner of the property, considered the jewel in the crown of the company created by Pedro García Meroño and Facundo Armero, is the company Phoenix, which already owns a luxury resort in Marbella called La Quinta. The so-called bad bank is also negotiating sales operations with a Spanish chain, which, if they materialise, may result in the sale of other assets by the property developer.

The Chilean group Phoenix is a business conglomerate backed by family capital, headquartered in Santiago de Chile. It holds investments in the real estate, tourism, renewable energy and finance sectors. One of its most high profile projects is Haciendas Talinay, a megaproject involving real estate and tourism developments located to the north of Santiago, in the IV Region of Chile, covering a surface area of 25,000 hectares, along 23 km of the Pacific Ocean coast.

Besides the Hotel Intercontinental La Torre, the Chilean group has acquired a retail centre containing a number of restaurants.

Polaris had constructed another five star hotel in Torre Pacheco called Intercontinental Mar Menor, which has 64 rooms.

The majority of Polaris’s urbanisations that have golf courses were transferred to the company IRM, which was constituted by the banks that had financed the company’s expansion until the burst of the real estate bubble halted its plans in their tracks….However, most of Polaris’s assets ended up in the hands of Sareb, which is now negotiating other operations. Sareb’s President, Jaime Echegoyen, declared in Murcia last May that he expected to see options to sell homes constructed by the property developer from Balsicas “in a piecemeal fashion”. (…).

The purchase of the Hotel Intercontinental, which has been closed to the public since 2013, is considered as an example of the interest that investor groups and tour operators have in Murcia. It is hoped that the operation will represent a new start for the region, which has endured severe economic hardship in recent years, since the crisis put a stop to the ambitious tourism projects of the boom years (…). CAM and Banco de Valencia both become major creditors of Polaris World, which ended up transferring the hole caused by debts with Polaris, which reportedly amounted to around €900 million, to Bankia.

Meanwhile, legal investigations that are being undertaken, following the collapse of CAM and Bancaja, have identified irregularities in terms of the granting of loans to the company from Balsicas.

Original story: La Opinión de Murcia

Translation: Carmel Drake

Sareb To Invest €45M In RE Asset Appraisals

18 January 2016 – El Economista

Sareb, also known as the “bad bank” has set aside €45 million to spend between now and 2018 on the appraisal and revaluation of all of the real estate assets that it owns, in accordance with the new accounting legislation issued by the Bank of Spain.

The President of Sareb, Jaime Echeogyen (pictured above), has said, in an interview with Idealista News, that the entity had appraised 60% of its registered properties by the end of 2015.

Echegoyen, who will celebrate his one year anniversary at the helm of Sareb in February after he replaced Belén Romana, said that 40% of the remaining properties will be valued by “cloning the results that have already been obtained on the basis of similar properties located in the same area”.

In this way, Sareb will comply with the Bank of Spain’s accounting legislation, which establishes up to three methods for estimating possible corrections to the value of these properties in order to ensure that they reflect market price.

According to the legislation, Sareb must value at least 50% of the assets it has acquired that are still on its balance sheet at year-end 2015 and all of them by 31 December 2016.

Echegoyen is optimistic about the (expected) performance of the real estate market this year and believes that the entity is now starting a “second phase”, in which it will consolidate the sale of its assets as well as recover loans from borrowers.

“We think that 2016 is going to be a very positive year, but we must do things in a calm fashion”, said Echegoyen after highlighting that the entity’s work over the last three years has involved classifying and valuing almost 200,000 assets, of which around half were homes, land, commercial premises, industrial warehouses and hotels.

The objective of Sareb’s President is to find buyers for those developments that were left unfinished and those that have been finished but have been left empty and he asserts that it is still too soon to talk about demolition.

Moreover, he has faith in the four agencies (Altamira, Haya, Servihabitat and Solvia), which are responsible for managing the portfolio sale of Sareb’s homes.

Echegoyen thinks that “there is a lot of interest in land” and he says that “in the current environment, it is likely that many savers will invest in a home to rent it out”.

In this sense, he indicates Sareb’s goals in the social sphere, which include: to provide commercial premises to self-employed people and entrepreneurs at “reasonable rents” and to offer land that does not have development potential “for the cultivation of allotments in exchange for a rustic farm income”.

Original story: El Economista

Translation: Carmel Drake