Blackstone Creates Europe’s First Restructured Loan Securitisation Fund

4 October 2016 – Expansión

The US giant Blackstone is doing great business in Spain with the problem assets that it bought from Catalunya Banc at the beginning of 2015. And it is now going to set the cat amongst the pigeons with an operation that looks set to represent a golden solution for its competitors and Spain’s banks in general.

The firm has just created the first securitisation fund in Europe from restructured loans. It is a pilot test, involving €265 million of credits, but it will likely open the way for other Spanish entities to dispose of the majority of their problematic loans without having to sell them to vulture funds at knockdown prices.

Blackstone completed the purchase of Catalunya Banc’s problematic mortgage portfolio for almost €3,600 million in April 2015 – the portfolio had a nominal value of more than €6,000 million – that sale was a condition for BBVA to acquire the Catalan group. The purchase was structured through a fund to which Blackstone contributed €3,598.4 million and the FROB the remaining €524.9 million.

The well trodden path

Now Blackstone, which has spent almost a year “negotiating” with the CNMV to obtain approval for this operation’s prospectus, is selling these mortgages to qualifying investors through a traditional securitisation fund, like the ones created in Spain to finance the credit boom until the outbreak of the financial crisis, but with the difference, given that this time the fund involves restructured loans. In other words, it contains credits whose conditions have been altered to allow the borrowers to afford the repayments.

Financial sources explain that, rather than discounts of 70%, such as those being applied to the direct sale of portfolios through bilateral contracts between entities and the funds who are active in this niche of the market – such as Apollo, Lone Star and Centerbridge, as well as Blackstone – these mortgages may now be placed on the market with discounts of less than 10% for the most subordinated (higher risk) tranches.

Nevertheless, these portfolios contain loans that borrowers have been repaying for more than 37 months without any help, thanks to the economic recovery, in other words, they contain “high quality” problem loans. In total, they will generate returns of more than 100 basis points above Euibor and so represent an interesting alternative for investors looking to take on more risk in the almost-zero interest rate environment.

Original story: Expansión (by Daniel Badía)

Translation: Carmel Drake

Oaktree Enters Exclusive Negotiations On Project Gaudi For c.€500m

13 April 2015 – CoStar Finance

Oaktree Capital Management has entered exclusive negotiations with FMS Wertmanagement for the predominantly Spanish Project Gaudi commercial real estate loan portfolio for a price thought to equal just over €500m, CoStar News has learned.

Negotiations are ongoing and the Board of FMS Wertmanagement is still to approve the sale, but Colony Capital, the second finalist, is no longer in the running to acquire the bad bank’s prospective maiden European NPL.

Project Gaudi, named after the legendary Catalan architect, has an unpaid balance of €740m, and is expected to trade at around 68 cents in the euro.

Cerberus Capital Management and Orion Capital Managers made up the top four, as revealed by CoStar News at the turn of the New Year.

Project Gaudi loan portfolio, which is being sold by Cushman & Wakefield’s Corporate Finance team in London, is comprised of 18 loans with broadly an equal split of performing, sub-performing and non-performing loans.

Project Gaudi, comprised of 16 loans secured by Spanish assets and two loans secured by Portuguese commercial properties, includes:

  • two five-star hotels in Barcelona and Cascais;
  • five shopping centre and leisure centres;
  • four business parks in Madrid and Barcelona;
  • a portfolio of 17 self-storage assets; and
  • several residential and industrial development sites.

The marquee asset in Project Gaudi is the 483-bed Hotel Arts in Barcelona (pictured), managed by Ritz-Carlton.

A consortium comprised of Host Hotels & Resorts, Dutch pension fund Stichting Pensioenfonds ABP and Jasmine Hotels Pte, an affiliate of Singapore sovereign wealth fund’s GIC Real Estate paid €417m in July 2006 for Hotel Arts, which at the time was the largest ever single-asset real estate transaction in Spain.

FMS Wertmanagement, founded in 2010 after the German government nationalised Hypo Real Estate, brought the Project Gaudi loan portfolio for sale in October.

The four second round finalists all placed bids above 60 cents in the euro, which reflects a price of €444m or above.

First round bidders included Davidson Kempner in a joint venture with Värde Partners, Blackstone, Deutsche Bank, Marathon Asset Management, Sankaty Advisors, BAML, Colony Capital, Starwood Capital, Apollo Global Management and Lone Star.

FMS Wertmanagement had as much as €13.4bn in remaining commercial real estate loans, as at the end of 2013, including €5.8bn of German loans, €1.8bn of US loans, €1.7bn worth of UK commercial real estate loans and €0.8bn and €0.6bn of loans secured by assets in France and Netherlands, respectively.

Spain has returned to economic growth in 2014 following seven difficult years of rising unemployment, salary deflation and depressed consumer spending.

But an increase in business activity has led to unemployment reducing and consumer confidence has reached its highest level since 2001 with improvements in disposable income and recovering house prices reinforcing this optimism.

All parties declined to comment.

Original story: CoStar Finance (by James Wallace)

Edited by: Carmel Drake