Santander Sells €400M NPL Portfolio To Grove

28 December 2015 – Expansión

Santander is cleaning up its balance sheet. Within the last few days, the entity chaired by Ana Botín (pictured above) has completed the transfer of a portfolio of non-performing loans amounting to €400 million to the Grove group, a subsidiary of the US entity Encore.

The operation represents one of the last divestments in the banking sector in 2015 after those signed (in recent weeks) by Bankia, which sold €650 million corporate loans to Deutsche Bank; and by CaixaBank, which sold €800 million doubtful developer loans to TPG and Goldman Sachs.

Santander’s sale forms part of Project Hungaroring, which initially included €700 million non-performing loans to SMEs. In the end, the perimeter has been reduced to €400 million.

This is one of the largest operations involving the sale of non-performing (unsecured) loans in 2015, given that entities have been more focused on getting rid of assets linked to the real estate market, such as mortgages and doubtful loans to property developers.

Deceleration

As a result, during 2015, non-performing loan portfolios worth around €3,000 million have been transferred in 2015, such as the portfolio sold by Sabadell (€800 million) to Aiqon; the portfolio sold by CaixaBank (€780 million) to Cerberus; the portfolio sold by Cajamar (€640 milion), also to the US fund; the portfolio sold by Ibercaja (€200 million) to Seer Capital; and BMN’s portfolio (€350 million), which has just been sold to Link Financial. Popular was also recently sounding out the sale of a portfolio worth just over €300 million.

Even so, the figure of around €3,000 million in non-performing loan sales in 2015 is significantly lower than previous years. In 2013, €12,000 million of loans were transferred and in 2014, the figure reached around €15,000 million.

Project Hungaroring is the first major operation performed by Santander this year. The group launched two projects during the first half of the year: Project Formentera, with €170 million of hotel debt; and Project Mamut, with €800 million overdue mortgages. Nevertheless, the latter was suspended during the summer following the change in the market due to the Greek and Chinese crises.

Santander had a default rate of 6.61% in Spain at the end of September, compared with an average of 4.5% for the group as a whole. Its real estate balance sheet has grown by €5,600 million in the last year, due to the inclusion of its stake in Metrovacesa.

The financial institution began to divest from property in 2013, with the sale of 85% of its real estate platform Altamira, to the US fund Apollo for €664 million.

In order to continue its sale of these assets, Santander has hired the Spanish director of Morgan Stanley, Javier García Carranza, as the Deputy General Manager and Head of Restructuring, Real Estate, Investments and Private Equity.

Buyer

The purchasing fund, Encore, is one of the main groups operating in the recovery business on the global level. It is conducting the operation through its subsidiary Grove, which recently acquired a loan management platform in Spain, called Lucania. Encore is listed on the Nasdaq with a market capitalisation of US$ 760 million (€695 million).

Another company owned by this US group, Cabot Credit Management Group, also made its first investment in Spain recently, with the purchase of Gesif from the US fund Elliott.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Project Formentera: Santander To Sell €170M Hotel Debt Portfolio

18 May 2015 – El Confidencial

A new portfolio of hotel debt has just come onto the market. At a time when investors’ interest in these transactions is at an all time high, Santander has put loans worth €170 million relating to 17 hotels up for sale.

A new portfolio of hotel debt has just come onto the market. At a time when investors’ interest in these transactions is at an all time high, Santander, the largest Spanish bank, has decided to pique the insatiable interest of international funds in this type of transaction through the launch of an operation known as: Project Formentera.

It involves a portfolio of loans worth €170 million, linked to 17 hotels. The majority are located in the Community of Valencia and the Canary Islands, which encourages operations with investors interested, primarily, in the holiday segment and in the (Canarian) archipelago.

The portfolio that Santander has just launched joins those being promoted by two of its main rivals, BBVA and Bankia, which have also decided to take advantage of the window of opportunity that has opened to try to offload some of their debts, which include loans that the financial entities are very keen to divest.

According to sources in the market, unlike what may happen in the residential market – a business the banks know very well, since historically they have had the best prepared teams to manage such assets when they fail – the hotel business is a very specialised segment, whose incident rate (casuística) is more difficult for financial entities to manage.

This means that their priority, in general terms, is to try and sell debt, rather than foreclose it and take ownership of assets that they are much less familiar with than residential. If we add the insatiable appetite of the large international investors for the hotel sector, fuelled by the perfect combination of low prices and a strong recovery in the tourism sector, now is the perfect time to carry out these kinds of transactions.

A string of transactions

In fact, at the end of last year, Bankia closed the sale of a batch of hotel loans to Starwood and Sankaty for €400 million (Project Amazona) and is now finalising the second part of that transaction, known as Castle, whose finalists are Apollo, Oaktree and Bank of America. BBVA has also just opened the bidding for 14 hotels it inherited from unpaid loans, a process known as Project Otelo; meanwhile Sareb has just engaged N+1 to manage the sale of a portfolio with a nominal value of €500 million, which is linked to the property developer Polaris World, in an operation known as Project Birdie.

And so the list goes on. A few weeks ago, the German bad bank FMS Wertmanagement sold the portfolio known as Gaudí to Oaktree for close to €500 million – a batch of problem loans linked to, amongst others, the iconic luxury hotel Arts de Barcelona, as well as another high-end property in Cascais (Portugal), five shopping centres, including Plaza Éboli and Heron City, several storage buildings, and residential and industrial assets.

Moreover, the large financial entities that signed the €152 million syndicated loan with the Basque property developer Urvasco, which, in turn, owns the hotel chain Silken, have spent the last few months selling their stakes both in this debt, as well as in those linked to certain establishments, including the Puerta de America hotel in Madrid; Bank of America is taking advantage of this window to enter through the ‘front door’ of what is considered to be the last great Spanish hotel chain up for sale.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake