13 October 2015 -Expansión
Bankia’s Project Big Bang is moving towards the finishing line and a clear frontrunner has emerged: Cerberus. In recent weeks, the US fund has submitted a bid for 75% of the assets forming part of the macro-project through which the nationalised entity wants to get rid of all of its foreclosed assets. Cerberus must have put around €2,100 million on the table, according to financial sources.
The same sources say that only one counter-offer has been submitted, by the fund Oaktree, one of the most active players in Spain in recent months. However, its offer must have been lower and for a smaller package of assets.
Other large funds such as TPG, Apollo, Lone Star and Blackstone all exited the process before the binding offer phase, due to the complexity and costs associated with the transaction. They were also deterred by the fact that Cerberus has first-hand knowledge of the assets, since it manages them through its real estate platform Haya Real Estate, formerly Bankia Habitat, which it acquired in 2013. For this reason, Cerberus has been able to offer a price that is closest to the reality of the assets, without having to incur significant expenses in terms of appraisal and consultancy fees.
Bankia’s department for Corporate Investments has been analysing the offers since they were submitted two weeks ago. This stage of the process is very complex, since each one of the proposals is limited to different groupings of the 46,000 assets up for sale, which include homes, commercial premises and plots of land. Moreover, the offers have been received just as Manuel Lagares, the Head of the Corporate Investment team, is leaving the firm, to move to Credit Suisse.
The key behind the success of this operation will be whether the prices are more or less aligned with those of the provisions. The portfolio, initially valued at €4,800 million has provisions amounting to €1,900 million, and therefore Bankia is not going to be willing to sell for less than €2,900 million.
The complexity of the process forced Bankia to announce over the summer that it would consider dividing up the portfolio. As such, it is possible that the entity led by José Ignacio Goirigolzarri will award the portfolio to both Cerberus and Oaktree. It may also opt to open a new round of offers with a more segmented portfolio, as a means of maximising its value.
In fact, according to sources close to the operation, the key obstacle is that the funds are leaving the lowest quality assets outside of their offers, and Bankia is not willing to be left with only the least attractive homes, commercial premises and land in the real estate market.
The investment bank Credit Suisse and the consultancy firm KPMG are advising the nationalised entity on this transaction.
The Big Bang portfolio comprises 38,500 homes, with a nominal value of €3,300 million; almost 5,000 commercial premises, worth €1,100 million; and 2,600 plots of land, with a gross price of €400 million.
For Cerberus, winning Project Big Bang would enable it to obtain economies of scale in its commitment to the recovery of the Spanish real estate sector. The US fund has acquired the real estate managers of Bankia and Cajamar – Cimenta2 – in recent years, as well as AyT, the securitisation fund manager, previously owned by Ahorro Corporación and Cecabank. But it still has not bought any large asset portfolios like its competitors Lone Star and Blackstone.
Meanwhile, Oaktree has revealed itself to be one of the most active funds in Spain in recent months, due to its purchase of a portfolio of mortgages from Bankia.
Original story: Expansión (by Jorge Zuloaga)
Translation: Carmel Drake