Sareb Quarantines its €30bn Mega-Portfolio Entrusted to Goldmans For The Time Being

11 June 2018 – El Confidencial

The most important operation in Sareb’s history is going to have to wait. Despite the wishes of Goldman Sachs, the bank charged with leading the sale of €30 million in toxic assets, to formally launch the process before the end of June, the entity chaired by Jaime Echegoyen would rather be cautious and have everything locked down, and well locked down, before it gives the final green light to an operation of this magnitude.

Particularly, when its largest shareholders, the State through the FROB, has just experienced an unexpected change of Government. Although sources at Sareb insist that a firm date has not yet been set for this sale and that all of the work carried out to date has been preliminary, during the conversations that Goldmans held with interested funds before the vote of no confidence (in the Spanish parliament), it was understood that the process would begin this month, according to several sources in the know.

Nevertheless, the change in the political panorama, which has resulted in Pedro Sánchez’s appointment as President and Nadia Calviño as the Minister for the Economy, lends itself to prudence, to avoiding any rushed decisions and to allowing time for the new Government to analyse this operation. Above all, when one of the objectives of the PSOE’s economics team has, for months, been to conduct a thorough audit of Sareb to understand the real extent of the public debt as a whole, according to Voz Pópuli.

The sale of the portfolio entrusted to Goldman would allow Sareb to decimate its liabilities in one fell swoop and generate two years worth of revenues in a single operation. The question is at what cost, in other words, what losses would such a divestment generate, given that all of these sales are being undertaken at discounts that the bad bank is finding very difficult to bear.

In fact, in order to play in this league of major operations, Sareb has been analysing for months all kinds of formulae to reduce its losses. One way of mitigating the losses and achieving better offers is to share the ownership of the capital of the new company to which these toxic assets would be transferred, like Santander and BBVA have done in similar cases.

Another lever that has already been analysed is to take advantage of the FAB (Banking Assets Fund) – that Sareb created in its early stages, because that would provide the operation with tax incentives, or associate it with the servicing contract, which has been in the hands of Haya until now.

That “servicer”, which is controlled by Cerberus, manages all of the toxic property that Bankia transferred to Sareb, whose deficit was the largest, in absolute numbers, of the bank rescue, another important argument why the new Government wants to understand in detail the design and consequences of the Goldman operation before giving it the green light, or not.

What is happening with Ebro and the property development plans?

(…) In terms of the entity’s other two star projects: the search for a partner to promote €800 million in residential assets and the sale of a €10 billion portfolio baptised Ebro.

The former has two finalists, Aelca and Aedas, and looks to be on schedule for a winner to be selected ahead of the summer (…).

In the case of Ebro, Sareb’s decision to not go ahead with this portfolio responds to, amongst other reasons, the fact that some of the perimeter proceeded from Haya assets, which are the ones that make up the entire Goldman portfolio, and so a decision was taken to desist from this project to give priority to the Goldman deal.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Sareb Seeks Partner(s) to Create Joint Venture With NPLs Worth €10bn

20 March 2018 – Expansión

Sareb has decided to emulate the large financial institutions and find a partner to help it digest its portfolio of foreclosed assets. The entity chaired by Jaime Echegoyen (pictured below) has decided to create a vehicle into which it will place loans with real estate guarantees (known as NPLs) and in which it will retain a minority stake.

Into this joint company, Sareb will place loans with a gross value of €10 billion, although the definitive figure has not been finalised yet, explain sources in the sector. It would be the largest sale ever made by the company that was itself created with assets proceeding from the intervened banks, and loans with all different kinds of real estate guarantees would be included: from land to tertiary assets. Sareb’s objective is to open up this new company to one or more financial partners and it has engaged the firms EY and CBRE to lead the negotiations. The process is still in a preliminary analysis phase, but the aim is to close it during the second half of the year or at the beginning of 2019.

Contacts

In making their preliminary contacts, the consultancy firms have approached the main international funds and managers with investments in the Spanish real estate sector to gauge their possible interest in this portfolio, which will initially be called Project Ebro. Once investors have confirmed their interest in the vehicle, thought will be given to defining how the alliance will be forged, say sources in the sector. Possible interested parties include investment giants such as Cerberus, Bain Capital, Blackstone, Apollo, Kennedy Wilson and Goldman Sachs. With Project Ebro, Sareb would be following in the footsteps of entities like Santander, which has reached an agreement with Blackstone to create the company Quasar, with real estate assets proceeding from its purchase of Popular.

In that case, the US fund owns a 51% stake, whilst Santander retains 49% of the shares.

This is not the only loan portfolio that Sareb currently has up for sale. The company has three other processes underway, although Ebro, given its size, is the star project. In this regard, it has engaged Arcano to sell the Nora portfolio, comprising non-performing loans (NPL) backed by residential collateral worth around €400 million; the Vilasoa portfolio, which includes €300 million in loans secured by land; and project Dune, a portfolio that has been relaunched in 2018 comprising €2.6 billion in unsecured loans. In that case, Sareb has engaged PwC to coordinate the sale.

These processes are happening in parallel to the search for a partner to strengthen its property development business. In that case, Sareb is holding talks with large real estate companies and funds with activity in the residential sector with the aim of working together on the development of buildable land and construction projects in progress.

In total, that portfolio is worth around €800 million and Sareb would contribute those assets to a company in which its partner would hold a majority stake.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake