Popular & Novagalicia Execute Debt & Seize San Jose´s RE Property

21/03/2014 – El Confidencial

Grupo San José has come to an agreement with principal lenders that granted a €2 billion loan to the construction firm in 2009. By virtue of assignment of payment, the banks received real estate assets. (…).

According to sources with knowledge of the negotiations, the operation will involve splitting San José into two divisions. The first one, inclusive of housing and land development assets, has been bringing losses to the company for the last six years. The other consists of construction assets that are much healthier in terms of toxicity.

The first step determined in the agreement between Jacinto Rey and the banks´ steering committee is the transfer of housing development activity to the lenders that could swap €1.6 billion for the branch´s shares. On the other side, the businessman would receive the construction company (…).

Among the lenders there are large banks like Banco Popular to which the firm owes €475 million, Novagalicia (€330 million), Santander (€260 million), Barclays (€186 million) and BBVA (€130 million). The entities that granted to San José loans of less than €100 million are: CaixaBank, Banco Sabadell, Catalunya Banc, Caixa Geral, Unicaja, Eurohypo, Ceiss, Caja3 and Kutxa.

Moreover, Sareb awaits return of its €186 million lent to the construction company by another entity but inherited by the bad bank. (…).

San José gained €427 million throughout 2013, that is by 14% less than a year before. (…) Its ebitda declined by 63% to €11 million, while the gross profit fell by mere €2.8 million (88.3% less). What is more, the real estate company had a turnover of €85 million (depreciation by 6.4%) and lost €209 million ( by 24% more). (…).

 

Original article: El Confidencial (Agustín Marco)

Translation: AURA REE

San José Enters Default & Requests Aid to Avoid Liquidation

18/03/2014 – El Cofidencial

Current talk of the town is a difficult situation of Grupo San José chaired by Jacinto Rey, facing maturity of a €2.400 million debt for last few weeks. After not having met requirements, the businessman negotiates with lenders (…) to waiver a syndicated loan granted to him in 2009. (…).

The company has not paid interest commission of €6.4 million before January 21st this year. The deadline was set by 85% of the lenders. (…).

Moreover, apart from the €81.9 million original payment amount, San José will have to add the not-fulfilled obligations from 2013 that amass the debt up to €139.14 million, deadlined in April. (…).

The Group came to an agreement with Banco Popular that had delayed payment of €77 million last year. The next and the last step will be to redeem €1.181,4 million that becomes mature in 2015, up to €1.320 million in syndicated loan. The debt expands to €2.400 million if several marketing and financial discount lines (€244 million), confirming process cost (€105 million), construction guarantee (€510 million) and other liquidity lines (€222 million) are taken under consideration.

Except for Popular, other lenders of the Group San José are: Sabadell, Novagalicia and Barclays. (…).

The only hope for the company right now is the new insolvency law that allows delay of payment if at least half of the lenders accept the proposal. However, the banks could demand guarantees and seize the majority of the capital (60%), now in hands of Jacinto Rey. (…).

At the end of 2013, San José recorded a €155.2 million loss, by 60% greater than in 2012 and four times bigger than the 2011 figures.

 

 

Original article: El Confidencial (Agustín Marco)

Translation: AURA REE

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

BBVA eliminates the minimum limit clause from 426.000 mortgages.

Those affected by the minimum limit in their mortgages, that limits the reduction of the monthly payment if the interest rates falls below a certain level, have reasons to celebrate.

BBVA will stop applying, from the 9th May onwards, the minimum limit clauses to 426.000 mortgages, from a total portfolio of 800.000 loans for the acquisition of a home.

Cajamar will also eliminate this clause and NCG Banco is studying it, according to financial sources.

BBVA´s decision determines that the institution will stop earning around 35 million Euros per month in June, taking the current value of the Euribor at one year as a reference, as informed yesterday by the banks to the national share market commission. The losses “in future months will depend on the evolution of the euribor at one year”, which closed in May at 0,48%, the statement adds. Therefore, if the reference rate for mortgages stayed near the current levels until the end of the year, the institution would stop earning 245 million Euros.

The institution presided over by Francisco González has 530.000 mortgages with this clause, 80% of which are currently being penalized by that limit. If the Euribor continues showing very low levels, 104.000 clients more, the remaining 20% will be freed from this clause, considered abusive by different court rulings. (…)

Source: Expansión

Fortress and Lindorff, finalists in the bid for the bad bank of NCG.

The sale of the bad bank of NCG Banco enters its decisive stage. The Galician institution has filtered the first offers of the interested funds and has designated two finalists, the funds Fortress and Lindorff, to whom a third investor could be added.

The US managing company and the Norwegian recovery platform will start analyzing in the next few days the assets on sale and will need to present their definite offer in the first half of July, according to financial sources.

The sale could be delayed a few weeks from the initial plan due to the complexity of the assets on sale. The operation, known as Project U2, includes the properties that were left outside the bad bank (Sareb); the recovery unit of NCG; the branches outside Galicia that were not included in EVO Banco; a debt management agreement for more than 20.000 million Euros; and part of the central services.

In total, the winner of this auction, which is being coordinated by the Italian group Mediobanca, will retain 30 branches; a team of 700 people; real estate assets for 250 million Euros; and the management agreement.

NCG Banco values that jobs are maintained that the buyer has a broad experience in the recovery market in Spain.

One of the points to be defined in the operation is if the institution that keeps the Single Asset Management Unit (SAMU) from NCG, will also manage the assets transferred to Sareb. The Galician institution transferred 5100 million Euros in properties and credits linked to the construction business.

From these two candidates, the Norwegian group Lindorff is the one that has bet on Spain in the last few years. This institution bought  the recovery platform from Santander, Reintegra, between 2011 and 2012, with more than 700 professionals included in the operation. This institution has also reinforced itself with the acquisition, along with the fund AnaCap, of default credits from Popular for 1143 million Euros.

On the other hand, Fortress has not closed any operation in Spain since the sale of 1000 million Euros in default credits from Santander, Banesto and Santander Consumer Finance, at the beginning of 2012. This is why, according to financial sources, “it has more ammunition to buy banking assets in the next few months”. This US fund negotiated to enter Sareb´s capital, along with Cerberus and Centerbridge, and it is seen as one of the firmest candidates to buy lots of real estate assets in Spain.

The offers of these new investors have won over those of at least six funds or financial institutions: EOS, the German group that acquired recently the recovery platform from Popular; GFKL, the German fund whose subsidiary in Spain is Multigestión; Deutsche Bank; the technological group IBM; WL Ross, from the US millionaire Wilbur L. Ross; and Centerbridge, the US management company that acquired the recovery business of Banesto.

NCG Banco has decided that the offers of these funds did not fit in with their business plan.

NCG still needs to negotiate with Lindorff or Fortress the duration of the management contract of the credits of the group. It should be between five and ten years.

The 30 branches can be used to maintain the already existing business, but the buyer of SAMU will not be able to provide credit nor liability, based on the ban by Brussels.

These branches have the worst quality business of the Galician saving banks outside Galicia, Asturias and Leon, in those regions where it arrived later and where it grew more disproportionally.

The branches with quality assets and more trusted customers outside Galicia were placed in EVO Banco, a subsidiary whose sale has also been negotiated in the last few weeks.

Source: Expansión

NCG is trying to reduce layoffs to 400 by selling two other areas.

The division in business areas implemented in NCG Bancoa at the end of 2011 was a sign of a future partition process of the institution for a possible sale in pieces. And after the millionaire rescue of Brussels (5.425 million Euros) and the demand in exchange of returning to the traditional banking business, this forecast has become a reality. The bank put his network Evo on sale one month ago (the one which operates outside northwest Spain, with 590 employees and 80 branches) and have just done the same with another two divisions: the asset management unit (UGAS), in charge of the recovery of default credits and other operations; and the real estate area. Another movement has to be added to these previous ones: the sale of a package of branches in Asturias and Leon to another institution, something which is still being negotiated.

The managing director, César González-Bueno, informed days ago all executives and employees involved in these areas. Until now, as explained by the management of the institution to some unions, there are only “initial contacts”, but a certain interest on those divisions has been detected in some funds and companies. The sale of these areas would be a double relief for the bank: an economic one and a labor one. On one side, it receives funds which help to reduce the received aid, to improve its margins and to become a more attractive institution for possible investors. On the other side, it reduces the impact of its fourth dismissal program, planned for 1850 employees. As these divisions are sold with the business (asset) and with managers.

According to union figures, there are around 200 employees in UGAS (Management Unit for Single Assets) and another 110 in the real estate area. The sale of branches in Asturias and Leon could include another hundred employees. The 590 included in Evo, which hopes for an aquirer before the end of 2014, would have to be added to this figure. If finally there is an acquirer, included the staff in these areas, the bank could reduce the planned layoffs to 400, plus the 455 early retirements. Thus, the impact on the personnel would be much lower.

Novagalicia is still digesting the complicated year 2012, the worse year in its history (including the history of the Galician savings bank that created this bank). It closed this year with 8000 million Euros in the red, as already advanced by its president, José María Castellano, in January. This figure was therefore already known.

Yesterday the bank provided the rest of its figures. It has carried out a record restructuring of over 8200 million Euros, converting doubtful credits in default ones, making bad-debt provisions for others….In 2011 this figure stayed below 2000 million Euros. This cleaning exercise, and the transfer of 5096 million  of toxic assets to Sareb (the so called bad bank) has increased the defaulting over 13%. Another negative point is the loss of individual deposits: 4800 million Euros, due to the loss of clients caused by the closing of branches. In credits, it has concentrated on refinancing, small and medium companies and families. The loans to the construction business is only 3,5% of its portfolio; one year ago it reached 22%.

The level of capitalization is over the average. Its core capital ratio, the main indicator of strength, is now at 11,17%. No wonder after the strong injection of public funds it has received.

Source: La Voz de Galicia