Fortress Unwinds Its Final Positions In Spain

7 September 2017 – Voz Pópuli

Fortress has definitively closed a chapter in its history in Spain. The US vulture fund, regarded as one of the most aggressive in the world, has launched two operations in the market through which it is looking to offload its final positions in the Spanish financial sector.

The two deals in question are Project San Siro and Project Baresi. In total, they comprise paid and unpaid loans worth around €300 million, according to financial sources consulted by Vozpópuli. The candidates to buy these loan packages include other opportunistic funds.

The two projects essentially comprise the final dregs of the portfolio that Fortress holds in the Spanish banking sector: loans from Santander, Barclays España (now part of CaixaBank) and Lico Leasing, the former finance company of the savings banks that Fortress purchased at the height of the crisis.

The US fund, led in Spain by the banker José María Cava, was one of the first to enter the financial sector at a time when the lack of trust at the international level was at its peak. It was between 2010 and 2011, when the first interventions of the savings banks began and several cold mergers were carried out, which gave rise to groups such as Bankia.

Critical time

Fortress completed its acquisition of a portfolio from Santander in 2012, just before the rescue of the finance sector. In that deal, Fortress purchased €1,000 million in consumer credits from the group chaired by Ana Botín.

A year later, the US fund announced the purchase of Lico Leasing. That was Fortress’ last major operation in Spain, which broke down just two years later. The fund took a long time to obtain authorisation from the Bank of Spain to approve that acquisition, and so by the time it did receive it, the credit tap had been reopened and so Lico arrived late to the recoveries sector.

For that reason, Fortress decided to close this business and its other financial commitments in Spain. First, it sold one of its recoveries platforms (Paratus) to Elliott and Cabot. Next, it sold Geslico to Axactor. And in terms of the other portfolios (Lico, Santander, and Barclays), it let some of them mature and the remainder is what is now being put up for sale.

It also leaves behind other possible opportunities that the fund considered, such as its failed entry into the share capital of Sareb and of other savings banks, with which it was unable to reach an agreement due to the significant price differences. Fortress is now more focused on other business niches in Spain and most notably in the Italian market, where it purchased, together with Pimco, the largest portfolio of loans, worth €17,000 million, from Unicredit last year. Given its profile, the Spanish banking sector will become the focus of Fortress once again when the next crisis hits.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

ECI Accelerates Sale Of 140,000 Doubtful Loans

10 April 2017 – Voz Populí

Financiera El Corte Inglés has selected three overseas funds as candidates to go through to the final round of its tender to award the first sale of doubtful loans in its history. The entity that is jointly owned by Banco Santander (51%) and El Corte Inglés (49%) has chosen Axactor, Cabot Financial and Link Finanzas as the finalists in Project Alexandria.

Through this process, Financiera El Corte Inglés wants to clean up the worst part of its credit portfolio, by selling off loans that it deems irrecoverable. Project Alexandria comprises 140,000 doubtful credits, mainly corresponding to loans worth €160 million.

This operation is generating a great deal of interest in the market, because to date, El Corte Inglés and its financing arm have not put any portfolios on the market. For this reason, the funds are all willing to pay a premium in order to begin to collaborate with the largest consumer finance company by volume of loans.

The three funds selected to participate in the final phase of the process are investors that have been operating in Spain for a while. They all have their own recovery platforms and they have a vested interest in making a name for themselves in this market.

Who are the candidates?

Axactor arrived in Spain two years go. It is a Nordic group founded by former directors of Lindorff, one of the largest platforms in this segment in Europe, which in Spain controls Aktua and provides services to Sabadell and BMN. Like its fellow group from Norway, Axactor arrived in Spain chequebook in hand and within a few months had purchased several portfolios plus the business and team at Geslico, the former subsidiary of Lico Leasing.

Cabot is also an international recovery platform, based in the United Kingdom, and with connections to Encore, one of the largest global groups, itself based in the United States. Cabot established itself in Spain a couple of years ago and made its break with the acquisition of one of the largest servicers, Gesif.

Meanwhile, Link Finanzas is another British fund whose interest in Spain dates back even earlier than those of the other two investors. Link has been purchasing portfolios in the Iberian market for years. Last year, it consolidated its international presence with the purchase of the last vestiges of BBVA’s consumer business in Italy, for €100 million.

One of these three investors will be awarded the first portfolio to bear the El Corte Inglés brand. They are expected to submit their binding offers, which could amount to €15 million – €20 million, after Easter.

The latest data from Asnet and the CNMV reveal that Financiera El Corte Inglés is one of the market leaders by market share and profit, given that in 2016, it earned more than €66 million. Besides this portfolio, there are currently more than a dozen portfolios in the market, from the main entities in the country, including: BBVA, CaixaBank, Bankia, Liberbank, Ibercaja and Popular, amongst others.

Original story: Voz Populí (by Jorge Zuloaga)

Translation: Carmel Drake

Norwegian Group Axactor Buys Geslico From Fortress

13 May 2016 – Expansión

On Wednesday, the US fund Fortress signed the sale of Geslico, the recovery firm of the former savings banks, to a new player in the Spanish market, the Norwegian group Axactor.

Through this agreement, Fortress has almost completely withdrawn from the financial sector, where it now only owns Lico Leasing. The opportunistic fund decided to backtrack because of the administrative obstacles that it came up against when it tried to take control of the savings’ banks financial company – 15 months. In recent months, it has also sold part of the stake that it held in Paratus, the former financing arm of General Motors, GMAC, to the British firm Cabot Financial.

The acquisition by Axactor represents the arrival of another Norwegian specialist firm in Spain. The financial crisis that the Scandinaivan countries experienced in the 1990s forced them to specialise in this type of business, something that they are now taking advantage of in the face of the accumulation of troubled banking assets in markets such as Spain.

Alongside Axactor, Lindorff has been one of the most active players in Spain in recent years. In fact, Axactor’s team in Spain originated in Lindorff, with executives such as Juan Manuel Gutiérrez Alcubilla (pictured above, right), the former Finance Director of Lindorff, now leading Axactor as the Country Manager.

Through the purchase of Fortress’ stake, Axactor España hopes to generate revenues of more than €40 million in 2016, compared with €10 million in 2015. The Norwegian group will employ a workforce of almost 500 people, more than twice the current number, across 9 operating centres. In addition, the operation will allow it to increase the volume of debt under management to €3,600 million. This investor has purchased portfolios from Oaktree – a Bankia portfolio – and York – from Ibercaja – in recent months. The advisors to this operation were N+1, on the side of Fortress and KPMG, on the side of the Norwegian group.

Original story: Expansión (by J. Z.)

Translation: Carmel Drake

Lindorff Buys Aktua From Centerbridge For c. €300M

21 March 2016 – El Confidencial

Aktua, the real estate services company created by the former Banesto, which was acquired by the opportunistic fund Centerbridge Partners in 2012, is about to change owners once again. The Norwegian company Lindorff has reached an agreement to complete the acquisition for almost €300 million, which will turn it into one of the largest landlords in Spain. The Scandinavian company has fought off competition from Apollo Capital Management, the toxic property management arm of Banco Santander, as well as the German firm Activum SG Capital Management.

According to several sources, Lindorff has won the auction led by Barclays, Bank of America Merrill Lynch and Linklaters against those two opponents, and is now putting the finishing touches to the legal conditions so that it can close the operation. It has not been simple because, whilst Aktua was on the market, its parent company, Centerbridge, acquired the real estate arm of Ibercaja – on 2 February – which meant that it had to recalculate the numbers for the potential buyers.

Aktua manages around 42,000 properties worth almost €7,000 million; those assets will be added to those that Lindorff already manages in Spain. The Scandinavian company was one of the pioneers to invest in the real estate and recovery services sector when the crisis first began. In fact, in 2012, it bought Reintegra for €100 million, the subsidiary of Banco Santander dedicated to the recovery of doubtful debts, and in December 2014, it acquired Sabadell’s recovery arm, for which it paid €160 million. Along the way, it also acquired several non-performing debt portfolios, including several from the bank led by Ana Botín.

Currently, Lindorff España, which last year appointed Alejandro Zurbano as its CEO, employs more than 1,100 professionals and has a presence throughout the country, with offices in Madrid, Valladolid, A Coruña, Alicante, Barcelona, Granada, Jerez de la Frontera, Santa Cruz de Tenerife, San Sebastián and Valencia. The multi-national company from the North of Europe has almost 4,000 employees in total, located in its 11 countries of operation, including Norway, Finland, Sweden, Denmark, Russia and Germany.

Although the amount of some of its operations have not been made public, Lindorff has invested almost €1,000 million to become one of the largest landlords in the country. Its work involves managing homes and retail premises, owned by the various real estate companies that it has acquired, claiming the payment of unpaid loans from their owners and negotiating the debt to obtain a spread. Once the last details of the purchase have been finalised, Linforff will manage non-performing loans, homes, retail spaces and land owned by Banesto, Ibercaja, Banco Mare Nostrum (BMN), Santander and Sabadell.

The sale of Aktua was essential for the main overseas funds that have become the largest landlords in Spain, because it is a volume-based business that is currently still very atomised. Sources in the market expect to see a process of concentration in the sector, in which almost €10,000 million has been invested, mainly on the purchase of non-performing loan portfolios. Some are already leaving, such as Elliott, which recently sold its recovery management platform to Cabot, and Fortress, which has now put its main businesses in Spain up for sale: the financing company Lico Leasing and the loan management platform Paratus.

For Centerbridge, the sale of Aktua is going to generate a sizeable profit, given that it acquired the platform for around €100 million in 2012 and is now selling it for almost €300 million. The real estate platform of the opportunistic fund employs 400 people and generates a gross operating profit or EBITDA of around €50 million.

Original story: El Confidencial (by Agustín Marco)

Translation: Carmel Drake

Fortress Finalises Its Withdrawal From Spain

17 November 2015 – Expansión

Strategy / The US fund will close the sale of Paratus to Elliott and Cabot Financial this week. It will also complete the ERE affecting more than 50% of Lico Leasing’s workforce.

The opportunistic fund Fortress is continuing its withdrawal from the Spanish financial sector. The US investor is finalising the sale of one of its financial businesses in the country, namely, Paratus, a platform that specialises in the management of problematic banking assets, which Fortress has controlled since 2009.

According to several financial sources, the sale of Paratus will be signed this week with the fund Elliott Advisors and the British group Cabot Credit Management Group, owned by JC Flowers and Encore Capital, taking ownership.

Each of the investors will take over a different part of Paratus’ business. Elliott is most interested in the real estate division and in the team. At the beginning of the sales process – known as Project Coast and advised by N+1 – Paratus held loans amounting to €152 million, secured by 866 properties; 500 homes worth just over €100 million; and a team comprising 43 professionals.

Meanwhile, Cabot is interested in acquiring the unsecured loans, which Fortress is selling for €426 million. The British group is looking to build upon its recent entry into the Spanish market, following its purchase of the Gesif platform from Elliott.

In addition to this possible sale, Fortress is also reducing its exposure to the Spanish financial sector by conducting an ERE at Lico Leasing. At the end of 2014, this subsidiary of Fortress had 130 employees. Through the restructuring, the fund has got rid of the commercial divisions of Lico Leasing, its other major financial business in Spain, which it acquired from the savings banks just one year ago; this means that it will no longer capture any new loans.

Complex operation

Fortress will continue to manage Lico Leasing’s existing portfolio and will continue to operate Geslico, its subsidiary that specialises in problem loans. That company recently integrated two of Fortress’s other companies in Spain: Auxiliar de Servicios y Cobros and Gestión de Activos de Aragón.

Fortress’s commitment to Lico Leasing was cut short due to the time required for its approval – almost two years – and by the re-opening of the credit tap by banks following the measures introduced by the ECB.

The US fund will continue with its other activities in Spain, by providing financing to companies and the real estate market.

Original story: Expansión

Translation: Carmel Drake

Centerbridge Could Raise €200M-€300M From Sale Of Aktua

6 November 2015 – Expansión

The consolidation has begun of the banks’ former real estate companies, also known as servicers. The US fund Centerbridge has put its subsidiary Aktua up for sale, which it acquired from Banesto in 2012. The operation – known as Project Pegasus – has been entrusted to the investment banks Barclays and Bank of America, and to the law firm Linklaters, and has been valued at between €200 million and €300 million, according to various sources.

Aktua currently employs around 400 people and manages real estate assets worth €6,000 million. Alongside the assets that originated from Banesto – whose management it maintained following that entity’s integration with Santander – Centerbridge also manages properties and debt from BMN and several recovery contracts for other entities.

Centerbridge’s withdrawal from the market was first triggered when Aktua lost the contract it had held with Sareb, following that entity’s tender to select new managers in 2014. Since then, those assets have been managed by Altamira, owned by Apollo and Santander, which seems to be the likely candidate to take over Aktua.

Sources in the sector do not rule out the possibility that Aktua will end up in the hands of one of the other servicers that are part-owned by funds operating in Spain, such as Altamira; Aliseda, owned by Värde, Kennedy Wilson and Popular; Haya Real Estate, owned by Cerberus; Servihabitat, owned by TPG and CaixaBank; and Anticipa, owned by Blackstone. They have also not ruled out the possibility that Solvia, owned by Sabadell, will enter the process, since it was awarded one of the Sareb contracts.

With these kinds of operations, international funds are looking to obtain scale and efficiency in order to make their platforms more profitable. These investors spent almost €2,300 million buying servicers from the banks.

According to Reuters, new funds, interested in entering the sector for the first time, may also join the bidding, such as the private equity firm Permira.

In addition to these possible mergers, experts in the sector also expect that some of the entities that have not outsourced the management of their assets may do so. In fact, Ibercaja is progressing with Project Kite, which includes 6,900 residential units, 1,300 commercial premises and industrial warehouses and 600 plots of land, worth €800 million, and a team of professionals specialising in the segment, comprising around 50 employees.

Centerbridge’s exit from this business comes at a time when other opportunistic funds are also leaving the market, such as Elliott, which recently sold its recovery management platform to Cabot; and Fortress, which has put two of its main businesses in Spain up for sale: the financing company Lico Leasing and the loan management platform Paratus.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Fortress Puts Its ‘Paratus’ Platform Up For Sale

29 May 2015 – Expansión

Project Coast / Fortress wants to dispose of one of its platforms, with 40 employees and a portfoliol of loans and homes amounting to €700 million.

(Photo: Michael Novogratz, Director at Fortress Investent Group)

Fortress, one of the first opportunistic funds to arrive in Spain has put up the ‘for sale’ sign over part of its business in Spain. The US fund has announced the disposal of its distressed debt management platform and of a portfolio of loans and homes amounting to almost €700 million.

The possible sale comes at a time when international investors are reviewing their strategies in Spain following the results of the regional and local elections. Even so, sources close to the transaction indicate that this deal was launched long before the election results were announced and that the fund remains firm in its commitment to Spain.

The investor has taken the decision after it completed the purchase of Lico Leasing from savings banks last year, with 500 employees and assets worth €600 million.

Former GMAC

Following this purchase, Fortress wants to sell its Paratus platform. The firm originated from General Motor’s former financing arm, GMAC. After being rescued by the US Government in 2008, GMAC – currently known as Ally Financial – sold its European business to Fortress, which represented the fund’s first foray into Spain. The fund started to purchase non-performing loan portfolios in Spain in 2009, and ended up managing a portfolio amounting to €4,000 million.

The opportunistic fund has engaged N+1 to advise on the sale of Paratus; several weeks ago the consultancy firm distributed information to potential investors regarding the so-called Project Coast. Following the first phase of the process, this week N+1 will announce which funds and platforms will go through to the final phase, which is expected to close at the beginning of July.

According to sources in the financial sector, this transaction is primarily targeted at overseas funds that want to establish a base in Spain. Investors such as Elliot – with Gesif -, D.E. Shaw – with Multigestión – and Cerberus – with Gescobro – have closed similar deals in recent years.

According to the information distributed by N+1, Paratus currently manages four asset portfolios and has two service contracts, which in total correspond to assets under management amounting to almost €1,000 million. The sale also includes the current team, comprising 43 professionals.

Almost €700 million of the loans and homes managed by Paratus will be transferred into the hands of the buyer. Of those, €426 million are unsecured loans without any kind of collateral; €152 million are loans secured by 866 properties; and another 500 homes are worth just over €100 million. Most of the real estate exposure is located in Cataluña, Andalucía and Valencia.

New strategy

Following this sale, Fortress will focus its strategy in Spain on Lico Leasing and on its subsidiary Geslico – where it recently undertook an ERE –, which render similar services to those offered by Paratus. Through Lico, the fund has a banking licence as a financial credit establishment, which was granted by the Bank of Spain in December 2014.

Fortress has altered its strategy in Spain after its failed attempts to buy a real estate subsidiary, such as Altamira and Aliseda, and to enter Sareb’s capital.

Following those endeavours, it completed its largest purchase in Spain, by purchasing debt in Realia amounting to €440 million, and since then, it has acquired small real estate portfolios and participated in the financing of indebted companies.

The fund in Spain is led by the banker José María Cava, founder of Gladia Capital and a former director of BBVA.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Fortress Is Preparing For Another ERE At Geslico

12 February 2015 – El Confidencial

Fortress, the alternative investment fund that bought the savings banks’ financing business, has announced to its employees that is it going to undertake a statutory redundancy procedure (un expediente de regulación de empleo or ERE) at Geslico, the subsidiary dedicated to loan recovery. Although the US entity has not quantified how many people will be affected by the drastic measure, sources close to the firm say that almost 40% of the workforce could be made redundant.

Geslico, the group formed by three subsidiaries with headquarters in Madrid, Valencia and Zaragoza, currently employs 450 people, of which around 200 could be made redundant as a result of the ERE. Although Fortress has not yet explained the real reasons for adopting this measure, sources close to the company explain the that job cuts are due to the loss of business resulting from the mergers of savings banks.

The announcement was made at Paratus, the business centre created by Fortress in Barcelona to manage all of the acquisitions the fund has made in Spain since it started to buy non-performing loans from financial institutions such as Banco Santander and debt from the real estate company Realia. Subsequently, between 2012 and 2013, Fortress acquired Lico Leasing, the holding company that provides financing to companies in the Spanish Confederation of Savings Banks (Confederación Española de Cajas de Ahorros or CECA), and Geslico, which it bought for almost €220 million.

Nevertheless, the name Fortress gained notoriety in Spain when the fund tried to sell 300 homes it had bought from Sareb, at a much higher price than the State’s bad bank had agreed to transfer them to a group of individuals.

These types of funds, known as opportunistic or vulture funds, have become the new owners of mountains of unpaid debt – estimated to amount to €50,000 million – which originated from the balance sheets of Spanish banks and was transferred for a price significantly below its face value. Subsequently, these funds manage the debts by trying to negotiate long-term payment plans with the borrowers to recover the initial amounts loaned.

The ERE at Geslico is not the first to be proposed by Fortress, which already significantly reduced Geslico’s workforce, at the end of 2013. At that time, Paratus informed its employees that 174 of the 470 strong workforce were going to be made redundant, with their contracts terminated. Another 40 were told that their employment contracts would be suspended temporarily (una suspensión temporal de empleo or ERTE), which was to result in 210 employees losing their jobs on a permanent or temporary basis. In the end, following internal negotiations, the list of redundancies was reduced to 120 people.

Prior to this, in 2012, the shareholders of Lico Corporation, which included BBVA, Banco Sabadell, Mapfre, Ibercaja, Unicaja, CECA, Novagalicia, CatalunyaCaixa and Bankia, amongst others, had already announced a redundancy procedure, which affected 95 of the 230 employees at the financing company.

In the most recent annual report filed by Fortress, the fund claimed that it had “confidence in the robust future of Geslico’s activity, due to its broad range of clients and the trend towards outsourcing debt recovery work”. Nevertheless, it warned in its forecast for 2014 that “annual recoveries may decline slightly with respect to 2013, as a result of the restructuring of the banking sector and the reduction in lending in recent years”. The reality has proven to be worse than expected and Geslico’s employees are paying the price.

Original story: El Confidencial (by Agustín Marco)

Translation: Carmel Drake