Bankia Analyses Block Sale Of Entire Real Estate Portfolio

7 November 2017 – El Economista

Spain’s banks do not want to pass up the opportunity that currently exists in the market to get rid of their toxic assets linked to the real estate sector as quickly as possible. Funds’ interest in acquiring properties and problem loans continues at the same level as during the summer, when Santander reached an agreement to transfer almost all of Popular’s real estate portfolio, worth €30,000 million in gross terms, to Blackstone.

BBVA announced a few weeks ago that it is negotiating with Cerberus to close a similar operation, although it did not share any details about the perimeter in that case. And now, it is Bankia’s turn to tread the same path and resume Project Big Bang to a certain extent, after it was suspended two years ago. The nationalised entity is currently analysing putting up for sale all of the real estate assets that it still holds on its balance sheet. The transaction would include the assets it inherits from BMN once both groups have merged at the end of this year.

This is one of the “strategic priorities” for the next few months, said Bankia’s CEO, José Sevilla, speaking recently at a press conference with analysts. He assured his audience that investors have an appetite for this type of large portfolio at the moment, unlike two years ago.

Just over €6,000 million of assets

The volume of the operation, if it goes ahead, in the end, will be significantly smaller than the deal closed by Santander, given that both Bankia and BMN have fewer foreclosed assets and doubtful debts. A significant part of their balances was transferred to Sareb in 2012 and 2013, under the framework of the bank rescue. Once the group chaired by José Ignacio Goirigolzarri has absorbed the Levante-based entity, it will have around €6,300 million in loans to property developers and foreclosed assets in total, a third of all the non-profitable assets – which include doubtful loans granted to other sectors.

Specifically, Bankia has €3,150 million in properties, with a coverage ratio of 34%, whilst BMN has €1,470 million, with provisions covering 28% of its risk. In terms of financing to property developers, the volume managed by Bankia amounts to almost €1,100 million and the amount handled by the bank led by Carlos Egea amounts to approximately €600 million.

Commercial focus on companies with a service platform

Between now and the end of the year, Bankia is going to place its commercial focus on the business segment, for which it has created a platform for services that complement financing. According to the director of this business, Gonzalo Alcubilla, access to loans is no longer a concern for companies and so now, they are asking about how to enter new markets and secure new clients to increase their turnover.

In fact, Bankia currently rejects fewer than 10% of the loan requests its receives. In this context, it has created “Soluciona Empresas”, a pack of free digital tools that helps businesses take management decisions, such as advice regarding exporting overseas. The platform may be used both by companies that are clients of the entity as well as by those that are not, according to Alcubilla speaking on Monday at the presentation of the instrument. The tools are grouped together for three purposes: to sell more, manage risks and obtain resources.

Original story: El Economista (by Fernando Tadeo)

Translation: Carmel Drake

Popular Puts €1,500M Macro RE Portfolio Up For Sale

6 June 2017 – Voz Pópuli

(…). The entity chaired by Emilio Saracho (pictured above) has launched an express plan to sell its problem assets and one of the key elements is the sale of the largest real estate portfolio to come onto the market in Spain since 2015. The portfolio of properties has been designed by KPMG, and has an initial value of between €1,500 million and €2,000 million, according to financial sources consulted by Vozpópuli. This is part of the plan that the entity is presenting to the ECB today to regain the confidence of the regulators. (…).

In addition, Saracho has spent the last few days meeting with investment banks to see how to accelerate the unblocking of Popular’s problem assets. (…).

The sale of problem assets is critical for Banco Popular regardless of its future. The heavy weight of those assets (worth €37,000 million) is the source of this entity’s problems, which have been further compounded in recent months by its capital and liquidity troubles and the risk of claims. (…).

For this reason, Banco Popular needs to accelerate the sale of the €36,800 million that it owns in toxic assets as soon as possible. Above all, it needs to focus on its foreclosed assets, which have the lowest level of coverage (38.5%) and which most concern the market and potential buyers. To bring the provisioning level of its properties in line with the levels adopted by BBVA and Santander, Popular would need to recognise (additional provisions of) around €1,500 million to €2,000 million.

Under the spotlight

With the sale of portfolios such as the one being advised by KPMG, Banco Popular would reduce some of its problems. Even so, financial sources doubt that the short term future of the entity is going to be determined by operations such as this one (…). Rather, they add, that this is a way of getting ahead with the work, regardless of the solution.

In this sense, the banks that are considering submitting a bid for Banco Popular have been making contact with opportunistic funds and investment banks over the last few weeks to work out how to share out the Spanish entity: the good bank could go to Santander, BBVA and Bankia, and the problem assets could go to overseas investors.

The key to accelerating the unblocking of the real estate assets is the prices that Banco Popular can accept on the basis of its provisions. Currently, the foreclosed assets are recognised on the balance sheet at 60% of their initial values, well above the values demanded by the opportunistic funds, which are closer to 30-40% of their initial values (…).

The portfolio that Popular is preparing represents one of the largest currently up for sale in Europe and the fourth largest to go on the market in Spain ever, after: Project Hércules, involving €6,400 million in problematic mortgages from Catalunya Banc, which was acquired by Blackstone; Project Octopus, containing €4,500 million in Eurohypo loans, which were purchased by Lone Star and JPMorgan; and Project Big Bang, which saw Bankia put most of its foreclosed assets up for sale, in a deal that it negotiated to the end with Cerberus, but which failed to close.

The two main favourites to acquire this latest portfolio are Blackstone and Apollo, the two funds that have been buying Popular’s other portfolios to date, albeit smaller ones, averaging around €400 million to €500 million. The entity currently has another process underway, involving a €500 million portfolio, which is being coordinated by Irea, and in which the following entities are competing: Oaktree, Apollo, Bank of America and Bain Capital.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Project Buffalo: BBVA Puts 4,000 Homes Up For Sale

16 November 2016 – Voz Populí

BBVA is stepping on the gas with the sale of its real estate assets. In recent weeks, the entity chaired by Francisco González (pictured above) has put up for sale its largest real estate portfolio since the outbreak of the crisis. The portfolio in question, known as Project Buffalo, contains around 4,000 homes worth between €300 million and €400 million, which the entity hopes to sell to international funds, according to financial sources.

The Spanish group is still one of the entities most weighed down by the property on its balance sheet, which amounts to €22,700 million, according to its results as at September 2016. €6,000 million of that figure relates to unpaid loans (doubtful and sub-standard credits) and almost €15,000 million corresponds to foreclosed assets. Even though it has a high coverage ratio (51%), BBVA has made a commitment to having an “immaterial” real estate exposure by 2018, according to its CEO, Carlos Torres.

Alongside this promise to investors, BBVA, like all of the other entities, needs to get rid of its real estate as soon as possible in order to make its business profitable again. (…). The bank chaired by González lost €315 million due to the Spanish property sector during the first nine months of this year, down by 24% compared to a year earlier.

In this context, “the strategy is to sell this exposure as quickly as possible, provided we do not destroy any value”, said Torres, speaking a few weeks ago. And for this reason, the entity has launched Project Buffalo.

This portfolio is the third largest, containing foreclosed properties, to be launched by a Spanish bank in recent years. The largest portfolio, Project Big Bang, was launched by Bankia and contained almost 40,000 homes worth €4,800 million, but in the end it was withdrawn after negotiations with Cerberus and Oaktree broke down. Subsequently, Sabadell sold 4,500 rental homes, worth €600 million, to Blackstone.

Now it is BBVA’s turn to whet the appetitive of the large international investors. Cerberus, Oaktree and Blackstone are all expected to study the operation, as well as Apollo, owner of 85% of Altamira and the purchaser of a small portfolio of homes from BMN last year; and Bain Capital (Sankaty), which acquired 2,500 properties worth around €350 million from Bankia a few months ago.

Project Buffalo is the sixth portfolio that BBVA has launched in the market this year, as part of a new drive from the new leader of the area, Javier Rodrígeuz Soler, Director of Strategy and M&A. He has taken over this role following Pedro Urresti’s move to HSBC.

The other portfolios include Project Vermont, containing €100 million of unpaid loans to property developers; Project Boston, with 16 offices buildings located in Madrid, Barcelona and Valencia; Project Coliseum, whereby BBVA sold its consumer business to Link Financial for €100 million; Project Detroit, with 441 warehouses and industrial plots of land; and Project Rentabliza, for the sale of real estate developments.

Original story: Voz Populí (by Jorge Zuloaga)

Translation: Carmel Drake

Bain Capital Raises €2,770M & Sets Its Sights On Spain

8 August 2016 – Expansión

Bain Capital wants to become one of the largest buyers of real estate in Spain. On Thursday, the US fund announced that it has completed the acquisition of three asset portfolios from Spanish banks, worth €1,146 million, over the last few months. The sellers are Cajamar, Sabadell and Bankia in three separate deals.

The acquisitions have been made through the fund’s Bain Capital Credit business unit, known until now as Sankaty.

And as if that weren’t enough, in the last few days, the US investor has completed the creation of a new fund in the USA worth $3,100 million (€2,769 million) for distressed investments (assets close to bankruptcy) and assets in special situations, according to Bloomberg.

“We see potential for making new investments in the Iberian Peninsula, especially in the real estate and overdue loan markets”, said Fabio Longo, CEO and Head of the real estate and overdue loan business in Europe at Bain Capital Credit. “We are excited about the opportunity to consolidate our position in the market for non-performing real estate assets in Spain through these investments”, added Alon Avner, CEO and Head of Bain Capital Credit’s European business.

Individual transactions

Of the three portfolios purchased, the largest was bought from Cajamar, containing €511 million of overdue syndicated and bilateral loans, granted primarily to real estate developers in different phases of bankruptcy. This deal, known as Project Baracoa, was the first major competitive sale of loans by a Spanish entity.

In addition, Bain Capital Credit acquired a portfolio of loans with a nominal value of €415 million from Sabadell, comprising overdue loans to property developers, mainly secured by residential and tertiary assets. This operation was known in the market as Project Pirene.

The most recent purchase by the US fund in Spain involved the Project Lane portfolio, comprising €220 million of foreclosed assets sold by Bankia. This was the first operation of its kind carried out by the nationalised group after the failed sale of Project Big Bang at the end of last year, through which it had wanted to sell all of the homes, developments and land on its balance sheet. In the end, Bankia was unable to reach an agreement with the investor who had expressed the most interest, Cerberus.

For all of these operations, Bain Capital has been advised by the asset managers Copernicus, HipoGes and Altamira; the consultancy firms Aura REE and CBRE; and the lawyers J&A Garrigues and Cuatrecasas.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Project Lane: Bankia Negotiates Sale Of €400M Secured Portfolio

13 June 2016 – Expansión

Project Big Bang paralysed the Spanish financial sector in 2015. At the time, Bankia tried to sell all of its foreclosed assets in a single transaction, including: 38,500 homes, 2,600 plots of land and 5,000 commercial premises, worth €4,800 million. A large number of funds were interested in the sale, but only Cerberus and Oaktree expressed their intention to submit binding offers. The prices and conditions did not match with Bankia’s expections and so it decided to suspend the operation at the end of the year. (…).

With all of those roadblocks, Bankia decided that it would maximise the value of its foreclosed assets by keeping them on the balance sheet and selling them off through the retail channel and in smaller portfolios, such as the case of Project Lane, see below. Even so, sources in the sector expect to see fresh attempts to sell large portfolios of foreclosed assets over the next few months and years, something that more than one entity has planned for 2016. To this end, the markets must improve further and provisions should be adjusted even more to the prices being offered by the funds. The Bank of Spain’s new accounting circular, which comes into force in October, is expected to help in this sense and to accelerate the divestment of the banks’ problem assets.

Project Lane

Now, Bankia is negotiating the sale of a portfolio of homes with three international funds, in an operation known as Project Lane. The entity is being advised by KPMG and is looking to transfer around 2,500 homes worth c. €400 million, according to financial sources.

The operation is in a very advanced phase, with binding offers due to be submitted next week. Bankia and its advisor have selected three funds, which according to the same sources, do not include Cerberus.

Initially, the US fund was the favourite buyer for the operation, on the basis that it knows the assets better than anyone else through Haya Real Estate, the former Bankia Habitat, which manages homes and real estate loans from Bankia. In fact, Cerberus was the fund that was closest to acquiring Big Bang, with an offer of around €2,100 million.

The portfolio of assets on sale as part of Project Lane primarily comprises homes, but also includes industrial and commercial assets, to a lesser extent. It is the largest sale of foreclosed assets that any of the banks have put on the market so far in 2016. Only Cajamar has explored this option in recent months, with Project Omeya – around €72 million -, as it waits to see what will happen during the second half of the year. The 2,500 homes on sale represent around 6% of the total haul that Bankia has on its balance sheet. The entity sold 9,200 properties through its branch network and Haya Real Estate last year. The aim is to try and repeat those figures in 2016.

Since the new management team, led by José Ignacio Goirigolzarri (pictured above), took over at Bankia, the nationalised group has been one of the most active in the sale of portfolios. Last year, it sold more than 80 batches of problem assets, which allowed it to decrease its doubtful debt balance from €20,000 million in 2013 to €12,500 million by March 2016. It has managed to do this thanks to higher provisions.

Original story: Expansión (by J. Zuloaga and S. Arancibia)

Translation: Carmel Drake

Cerberus Sees Five More Years Of Portfolio Sales In Europe

9 May 2016 – Expansión

The largest opportunistic fund thinks that the market will remain active in Europe for another five years. That was the view, expressed last week, by the Head of the US fund Cerberus, the investor that has acquired the most toxic debt from banks and governments in Europe.

“I expect the opportunity to buy doubtful loans to last for at least another five years. In baseball terms, we are still in the early innings”, said John Snow (pictured above), the co-founder and CEO of Cerberus.

Last year, according to Bloomberg, the fund invested €28,000 million in debt in Europe, including Northern Rock mortgages, which were sold by the British Government.

Cerberus is also one of the most active international investors in Spain.

In recent years, it has acquired two platforms, which themselves buy problem assets from banks: Haya Real Estate, the former Bankia Habitat, for the management of real estate assets; and Gescobro, for the management of unsecured debt.

In Spain in recent years, besides these two platforms, Cerberus has also acquired AyT, the securitisation fund manager owned by Ahorro Corporación and Cecabank; Cimenta2, the real estate arm of Cajamar; and the firm Patron Properties.

Advisors

The fund relies on several high profile advisors for its strategy in Spain, including Juan Hoyos Martínez de Irujo, the former President of McKinsey España; Francisco Luzón, the former CEO of Santander; Manuel González Cid, the former Financial Director of BBVA; Francisco Lamas, a former Director at McKinsey; and José María Aznar Botella, the son of the former President of the Government.

Cerberus came close to signing one of the largest deals in Spain last year. The US fund offered Bankia just over €2,000 million for a 75% stake in its foreclosed assets, as part of Project Big Bang, which was eventually suspended by the entity chaired by José Ignacio Goirigolzarri.

Original story: Expansión (by J. Z.)

Translation: Carmel Drake

Project Wind II: Bankia To Put €800M NPL Portfolio Up For Sale

21 March 2016 – El Confidencial

After withdrawing Project Big Bang from the market, through which it had hoped to divest the real estate assets that it did not transfer to Sareb amounting to €4,800 million, Bankia has decided to accelerate the pace of its other divestments, as it continues to analyse how to get rid of all of the property that it has on its balance sheet.

To this end, the entity chaired by José Ignacio Goirigolzarri is finalising the launch of Project Wind II, involving the sale of a portfolio of overdue mortgages. Although the details are still being finalised, the bank’s idea is to place a portfolio containing loans amounting to almost €800 million.

Last year, Bankia successfully closed Project Wind I, an operation that represented the entity’s first major sale of mortgages to investors in its history. On that occasion, the bank put loans with a value of €1,300 million on the market, divided into three sub-portfolio: more than 4,000 mortgages worth €918 million; loans to SMEs secured by RE collateral worth €180 million; and unpaid loans to SMEs worth €216 million.

Oaktree ended up acquiring the mortgages, whilst Chenavari bought the two smaller packages. For this second version, Bankia has already started to make contact with the funds, a temperature check that has awakened interest in the sector, given that it involves one of the most important portfolios forecast for this half of the year, together with Project Normadía, launched by Sabadell.

As El Confidencial revealed, the bank chaired by Josep Oliu has engaged PwC to sell its €800 million portfolio of consumer loans and credit cards, and is also analysing placing another package containing loans to property developers amounting to €1,700 million.

Appetite in the market

The funds that normally participate in these types of processes, such as TPG, Cerberus, Apollo, BofA, Goldman, Oaktree and Chenavari, are paying particular attention to the sale of these portfolios, above all, after Sareb shifted its strategy and decided to commit itself more to the retail channel.

Bankia is expected to resume Project Big Bang at some point during 2016 but, instead of forming a single portfolio, the market expects that it will divide it into several batches, given that the interested funds have already advised the bank that it is too large and diverse a portfolio to be ‘hunted down with a single shot’.

Last year, the entity carried out four major loan portfolio sales for a combined total of almost €2,800 million, which benefitted the bank’s balance sheet and allowed it to reduce its doubtful balance by more than €2,000 million.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Banks Expect To Sell Land & Developments Worth €12,000M

10 December 2015 – Expansión

The banks’ divestment teams are facing a frantic couple of weeks. The main Spanish entities have twenty operations underway through which they are seeking to remove more than €12,000 million in loans and real estate assets from their balance sheets, equivalent to 5.5% of their current exposure. Most of these deals will be closed before the end of the year.

Thanks to these operations – and others closed since June, plus the sale of homes through the retail channel – Spain’s banks may reduce their problematic loans to €200,000 million within the next few months, compared with the balance in June (€224,000 million). This level represents 8.7% of the total assets held by Spain’s banks, which “put downwards pressure on the entities’ income statements, reducing their ability to generate profits”, according to the Bank of Spain.

The portfolios currently up for sale include all types of assets, including homes, plots of land and developments – both completed and in progress. Of the €12,000 million, around half are doubtful loans secured by these types of collateral and the remainder are foreclosed assets.

Key operation

The largest operation in progress is Bankia’s Project Big Bang, whereby the nationalised entity is looking to transfer the majority of its foreclosed assets: 38,500 homes, 2,600 plots of land and 5,000 commercial premises, worth €4,800 million.

The bank has two offers on the table: one from Cerberus for 75% of the assets and another from Oaktree, although the technical complexity and the upcoming general election mean that this operation is going to be delayed until the first quarter of 2016.

Bankia also has another portfolio up for sale, containing €700 million doubtful property developer loans, linked to commercial and industrial assets – namely, Project Babieca.

The most active entity in the market at the moment is Sareb. The bad bank has five portfolios up for sale with a nominal volume of €2,200 million. Through these, the bank is seeking to increase its revenues in a year that has been made difficult by the migration of assets to new managers and the new accounting circular.

CaixaBank and Sabadell have been just as active this year. The entity led by Isidro Fainé has already sold two portfolios and has a third one up for sale, containing doubtful property development loans, for €900 million. Meanwhile, Sabadell is finalising the sale of 5,000 homes for rent, which comes soon after its sale of CAM’s real estate companies to Sankaty.

Other entities that are working hard to complete major divestments include Ibercaja – with an operation to sell the majority of its foreclosed assets, forecast for the beginning of 2016 – and BMN, which has a portfolio of doubtful loans and homes up for sale.

Looking ahead to 2016, the experts expect to see large operations involving the sale of problematic assets such as those of Bankia and Ibercaja, and a larger role for the major banks, Santander and BBVA, which decided to suspend their sales in 2015.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Project Goya: Ibercaja To Sell Loans To Oaktree For €350M

27 October 2015 – Expansión

Ibercaja continues to take steps to clean up its balance sheet as the rumour mill runs rife about mergers in the sector.

The Aragonese entity is negotiating the finishing touches on the transfer of one third of its portfolio of property developer loans to the US fund Oaktree, with a nominal value of €900 million, according to financial sources. The agreed price will amount to between €350 million and €400 million.

This will be the largest divestment undertaken by Ibercaja to date and fits within the current clean up strategy that the medium-sized entities are accelerating ahead of going public or merging next year.

The sale forms part of Project Goya, which Ibercaja put up for sale before the summer, guided by the investment bank N+1.

This portfolio comprises debt from 124 Spanish property developers and is secured by finished housing and developable land. In total, the loans are linked to almost 2,200 homes and other residential assets, primarily located in Andalucía, Madrid and Cataluña.

Goldman Sachs and Blackstone are also competing in the final stage of the process alongside Oaktree. These types of portfolios tend to be placed in the market for around one third (of their nominal value), therefore Ibercaja looks set to make a gain of €50 million more than it initially expected.

With the sale of these kinds of assets, Ibercaja is looking to fulfil two main objectives: clean up its credit portfolio and obtain resources – free up provisions – to use in its recurrent business.

Express clean-up

After Bankia, the entity led by Amado Franco is the Spanish group that has taken the most decisive strategy to divest its real estate portfolio. Both entities have launched operations to drastically reduce their real estate exposure. In the case of Bankia, this strategy is focused on Project Big Bang – comprising assets amounting to €4,800 million – for which it has so far received offers from Oaktree and Cerberus.

Meanwhile, in addition to Project Goya, Ibercaja has another project underway known as Project Kite. There it is looking to sell the majority of its foreclosed assets: 6,900 residential units, 1,300 premises and industrial warehouses and 600 plots of land, worth €800 million. (…).

For Oaktree, this operation would enable it to strengthen its strategy in Spain. The fund has already closed two large purchases in recent months, namely: the problem debt from the German bad bank, FMS, in Spain, with loans secured by hotels, such as the Arts de Barcelona hotel; and a portfolio of unpaid mortgages from Bankia.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Project Babieca: Bankia Puts €672M Portfolio Up For Sale

21 October 2015 – Idealista

Bankia has put another debt portfolio up for sale, worth almost €700 million and secured primarily by commercial assets (offices and shops), land and industrial assets. The project has been named ‘Babieca’ like the legendary horse of the hero El Cid Campeador.

Bankia is continuing with the process to reduce the real estate exposure on its balance sheet and to that end, has put another loan portfolio up for sale, a technique that has been used all over the world, during the process to clean up the financial sector. In this case, the so-called ‘Project Babieca’ is in the hands of the consultancy firm PwC, which is looking to place the portfolio, worth €672 million, with international investors, according to financial sources consulted.

The portfolio comprises 3 different sub-portfolios, but Bankia hopes to sell them all to a single buyer:

Portfolio Jimena: contains loans amounting to €115 million, primarily secured by land (specifically, 81% is guaranteed). This debt is shared between 9 borrowers, none of which have filed for insolvency to date.

Portfolio Elvira: contains debt amounting to €172 million, of which 78% is backed by commercial assets (offices and shops) and industrial assets. This debt is distributed between 40 borrowers, of which 18 have fallen into arrears.

Portfolio Sol: contains debt amounting to €384 million, of which 73% is secured by commercial assets. This tranche is spread between 30 borrowers, 22 of which are solvent.

According to the sources consulted, Bankia expects to receive non-binding offers from a handful of investors by the middle of October and to receive binding offers by the middle of November. In this way, it hopes to close the sale of this package in December.

If it manages to complete the sale before the end of the year, Bankia will be able to add the achievement to another sale it has already completed of another debt portfolio worth €1,300 million, which mainly contained doubtful mortgages to individuals. That package known as ‘Project Wind’ was awarded to the funds Oaktree and Chenavari (in July).

Bankia has also closed another operation this year, the sale to Bank of America of a hotel debt portfolio at the beginning of June. That operation, known as ‘Project Castle’ comprised 91 operations linked to 45 assets. 56% of the total portfolio related to doubtful debts.

In addition, Bankia has another package of real estate assets up for sale at the moment, the so-called ‘Project Big Bang’, which includes a portfolio of residential and commercial assets and land, worth €4,800 million. This is a sale that the bank is also looking to accelerate and one that would represent the largest sale of real estate assets since the real estate bubble burst.

Original story: Idealista (by P. Martínez-Almeida)

Translation: Carmel Drake