Tag: rating

S&P Increases Colonial’s Credit Rating to BBB+

18 October 2018 – Expansión

Standard & Poor’s has increased the rating assigned to Colonial from BBB to BBB+ within the investment grade category.

The credit agency has ruled out possible revisions of that rating by assigning a stable outlook for the company.

Colonial managed to increase its rating after reaching an agreement with Qatar, whereby the sovereign fund of that country became the company’s largest shareholder by acquiring 20% of its share capital through an exchange of shares.

By virtue of that operation, the Spanish Socimi consolidated its controlling position in its French subsidiary Société Foncière Lyonnaise (SFL), given that Qatar granted it the 22% stake that it owned in that company, allowing it to increase its share of the capital to 80%, in exchange for shares in the Spanish real estate company proceeding from a non-monetary capital increase.

S&P also reviewed Colonial’s rating upward after the Socimi completed the merger of another Socimi Axiare and closed the sale of a portfolio of offices owned by that company which did not fit with its business strategy.

Original story: Expansión 

Translation: Carmel Drake

Cerberus Prepares for Haya’s Stock Market Debut After the Summer

9 February 2018 – Cinco Días

Metrovacesa achieved it on Tuesday, despite problems to cover supply and the nefarious stock market session that it suffered. The large Spanish property developer, which abandoned the equity market in May 2013, made its return last week. It hasn’t exactly eased the way for the upcoming debuts of Vía Célere, owned by the fund Värde, or the Socimi Testa. But it hasn’t made a total hash of it either.

In this way, the US fund Cerberus is in the process of contracting the banks that will handle the debut its Spanish real estate servicer subsidiary on the stock market. The aim is for that firm to be listed from September. The entities that are on the list of candidates have already done their calculations and are citing a valuation for the company, albeit preliminary, of around €1.2 billion. The aim is to place between 35% and 50% of Haya Real Estate’s capital at this stage. A spokesman for the company declined to comment on this information.

The company, which was created in October 2013, manages property developer loans and foreclosed real estate assets from Bankia, Sareb, Cajamar, Liberbank, BBVA and other financial institutions, worth €39.88 billion at the end of September 2017.

The process of going public is the logical next step, after Haya placed €475 million in high yield bonds in November, with ratings of B3 (Moody’s) and B- (S&P). In other words, in the junk bond range, six levels below investment grade.

The underwriters of that debt, which matures in 2022, were Santander, Bankia, JP Morgan and Morgan Stanley. And they sold it with considerable success. Despite its credit rating, the firm pays an annual return of just over 5% for that liability.

Haya, led by Carlos Abad Rico (formerly of Canal + and Sogecable) offers services across the whole real estate value chain, but it is not a property developer. Rather, it manages, administers, securitises (…) and sells real estate assets such as homes and offices, but it does not own any of the properties.

Bankia Habitat was the seedling of Haya, and it has grown in line with the need by the financial sector to get rid of assets linked to property. One of Haya’s key businesses is the management of loans linked to the real estate sector. It advises on loans and guarantees, recovers debt and converts loans into foreclosed real estate assets.

The other major part of its revenues stems from the recovery and management of properties through their sale or rental. Haya employs 680 professionals and has a sales network of 2,400 brokers. The value of its property developer debt portfolio amounts to €28.7 billion and its real estate asset portfolio amounts to €11.2 billion. Moreover, Haya is going to bid to manage the assets sold by BBVA to Cerberus in November. Haya’s current shareholder acquired 80% of the BBVA’s portfolio of real estate assets, amounting to around €13 billion, for €4 billion (…)

Consolidation

The Spanish banks’ other real estate management companies are waiting for Cerberus to make the first move, according to financial sources. Haya will open the door to the stock market for them if everything goes well or it will serve to consolidate the sector, both here and in Europe.

There are three high profile players on the list. Servihabitat, which manages assets amounting to around €50 billion and which belongs to the fund Texas Pacific Group (TPG), which has held a 51% stake since September 2013, when CaixaBank sold it that percentage; the bank still holds onto the remaining 49%. Altamira, owned by Santander (15%) and the fund Apollo (85%), which also handles assets worth around €50 million in Spain. The volume managed by Solvia, owned by Sabadell, amounts to around €31 billion.

Moody’s warns that the business of Haya Real Estate, the largest company in the sector in Spain, depends on the economic performance of the company and the renewal of its current management contracts. Specifically, one of the most important, with Sareb (…), signed in 2013, is due to expire in December next year.

In terms of its strengths, the ratings agency indicates Haya’s extensive knowledge of the market and its high margins. The firm’s gross operating profit (EBITDA) during the first nine months of last year amounted to €89.8 million, with net income (the amount really invoiced by the company) of €165.8 million.

Original story: Cinco Días (by Pablo Martín Simón and Laura Salces)

Translation: Carmel Drake

Moody’s: Popular Cannot Afford To Wait To Clean Up Its BS

29 May 2017 – Expansión

The credit rating agency Moody’s considers that Banco Popular does not have time to wait for the recovery in the real estate sector in Spain to have a positive impact on the quality of the real estate assets in its portfolio.

In fact, the rating agency considers that Popular’s solvency problems mean that it must reduce the non-performing assets that are weighing down on its balance sheet in an “accelerated” way, without allowing the entity to fully benefit from the reactivation of the real estate market.

“The recovery in the real estate market is a positive factor for the banks that are most exposed to the real estate sector”, said María Viñuela, Deputy Vice-President and analyst at Moody’s.

Nevertheless, Viñuela understands that the recovery in the housing market will materialise “over time”, which is why she reiterates that Popular is “under pressure” to improve its solvency and accelerate the reduction of its non-performing assets within a “shorter” time frame.

The entity chaired by Emilio Saracho (pictured above), whose rating Moody’s downgraded to B1 in April, has non-performing assets amounting to €37,000 million – 25% of the total – on its balance sheet, most of which are related to the real estate sector, which is one of the major factors that impinges on its value in a possible corporate operation.

The bank, which is currently analysing all of the strategic options open to it, still has more than two weeks to decide whether to go ahead with the sales process in which it has been immersed since 16 May, given that a deadline of 10 June has been set for taking a decision.

For the time being, Popular has not received any specific firm offers, nor has it assumed any commitments, which means that it has not completely ruled out a capital increase, as Saracho stated during the most recent General Shareholders’ Meeting.

Amongst Popular’s strengths that may attract its buyers include its franchise and its SME business, where the entity is the leader of the sector, with a market share of almost 18%.

Original story: Expansión

Translation: Carmel Drake

Banco Popular Records Losses Of €137M In Q1

8 May 2017 – La Vanguardia

Banco Popular recorded losses of €137 million during the first quarter of 2017, its first set of accounts to be published since Emilio Saracho (pictured above) took the helm. And it is clear that he has not escaped from the fallout of the property sector, the evil that tormented his predecessor Ángel Ron. In fact, the loss in Q1 is primarily explained by a €496 million provision against the entity’s real estate portfolio.

Compared to the previous year, the panorama is completely different. During the first quarter of 2016, Popular recorded a profit of €94 million. The need to clean up and strengthen the balance sheet means that the numbers have gone into the red, but the new provisions increase the coverage ratio to 45.2%, with €570 million in non-performing assets and raise the default rate to 51.4%, according to figures published by the entity on Friday.

The bank is going through a difficult time, it registered losses of almost €3,500 million last year. To stay afloat, on Friday, the entity ruled out selling assets “in an indiscriminate way”, given that it will take the decisions that it considers appropriate “always taking into account the value that may be generated for the shareholders”, according to the bank’s CEO, Ignacio Sánchez-Asiaín.

Popular is looking to sell both WiZink and Totalbank if it receives good offers for them and has said that the bank is holding “advanced conversations” for the sale of its non-strategic assets.

Similarly, the director revealed that Project Sunrise, which had been driven by Ron and which sought to place the entity’s real estate assets into a type of bad bank, has been “completely abandoned”. “If we don’t have to recognise any extraordinary provisions, of course, we expect to generate profits this year”, he added.

Popular lost €800 million in deposits in February due to the relevant events that marked the transformation of the entity and reductions in its rating by the credit rating agencies.

Nevertheless, the bank is “succeeding” in recovering deposits and specified that in this sense there is a monthly volatility, which means that Popular is not “worried” by what has happened over the last few months.

The accounts reflect gains of €180 million in the retail business, where the bank specialises in SMEs. The volume of loans granted decreased by 5.6% to €100,859 million, with a default ratio that rose to 14.91%, compared to 12.68% a year before. (…).

Meanwhile, the real estate activity recorded losses of €317 million. Property sales amounted to €459 million, with an 18.5% increase in retail sales, at the same time as the sale of real estate loans reached €402 million.

As the end of the quarter, the capital ratio amounted to 11.91%, above the requirement of 11.375%.

Original story: La Vanguardia

Translation: Carmel Drake

Blackstone Sells c. €300M Of Catalunya Banc’s Mortgages

8 May 2017 – Expansión

The banks’ non-performing assets are finally starting to generate returns for some of the entities that backed them during the worst moments of the crisis. Four and a half years after Catalunya Banc fell victim to the excesses of the real estate sector and was intervened by the State, and two years after Blackstone finalised its purchase of a portfolio of doubtful mortgages from the Catalan entity, which is now owned by BBVA, the US firm has shown that what were once toxic assets, are toxic no more.

And it has done so through the sale of some of the mortgages that it bought from Catalunya Banc. In fact, Blackstone has created a securitisation fund, with a nominal portfolio of €400 million in loans, and has placed it amongst investors at a price that represents selling almost €300 million of the total without a discount, according to official documentation submitted by the company.

Given that Blackstone purchased mortgages from Catalunya Banc worth almost €6,400 million nominal and that it paid €3,600 million for them, the fact that it has now sold the majority of the securitisation fund at its nominal value implies that investors no longer consider them to be problem loans and that they are willing to buy them without demanding an additional return for any higher risk.

Of course, there are several factors that have contributed to this. “Blackstone has included the best loans from the portfolio in the securitisation fund”, say sources in the market, who insist that the US firm still owns the majority of the loans it purchased two years ago.

In addition, the management of the loans plays a role, given that 82.75% of them have been restructured, according to figures from Fitch, which means that they have been granted grace periods or parallel financing since Blackstone took over the portfolio.

Different tranches

The result of these two factors is that Tranches A and B of the securitisation fund have been sold to investors without any discount on their nominal values. They will pay annual interest of 0.9% and 1.9%, respectively, until 2022 (from April of that year, the yield will rise to 1.6% and 3.3%).

The two tranches amount to €288 million, i.e. they represent 72% of the total fund. Meanwhile, Tranches C and D, which contain the worst mortgages and which have the lowest solvency rating, have been sold for 98% and 93% of their nominal values and will pay interest of 2.5% and 2.6%, respectively, for the first five years. Tranche E, the most risky, has been subscribed in its entirety by Blackstone, at a significant discount. (…).

Original story: Expansión (by Inés Abril)

Translation: Carmel Drake

S&P: Banks Will Sell Off €35,000M In Toxic Assets In 2017

25 January 2017 – Cinco Días

S&P Global Ratings is convinced that there is going to be a new wave of M&A activity in the Spanish financial sector, as a result of the low return environment, which is putting downwards pressure on banks’ margins, and the rising regulatory costs.

The high volume of non-productive assets on the balance sheets of most entities is also having a negative impact on their accounts, which is pushing them towards mergers, said the Director General of Financial Institutions at S&P, Jesús Martínez, yesterday. The Director considers that these consolidation processes will help smaller entities improve their returns.

The Bank of Spain and most of the major financial institutions in Spain share this idea and are convinced that there will be a second round of mergers over the medium term. These mergers will join the one that Bankia and BMN are likely to complete in July.

In its forecasts for the year ahead, the ratings agency considers that the Spanish financial sector will be supported by the “robust” economic recovery that is happening in Spain at the moment, as well as by the improvements that are being seen in employment and in the real estate sector. It believes that the latter is key for the improvement of banks’ yields. In fact, it thinks that the banks will manage to considerably reduce the property they hold on their balance sheets this year, decreasing the balance from €183,000 million at the end of 2016 to around €148,000 in 2017.

This is the first time that the foreclosed asset balance will fall below its 2010 level (€175,000 million), according to data provided by S&P.

Non-productive assets in the Spanish banking sector peaked at €320,000 million in 2012 if we take into account the foreclosed assets that were transferred to Sareb by the nationalised bank. In 2016, the volume of foreclosed assets decreased by around €37,000 million, according to S&P. Between 2016 and 2017, the total decrease is expected to amount to around €70,000 million.

Nevertheless, the ratings agency warns that the sector will be affected by certain risks resulting from the crisis, such as the high volume of non-productive assets that the entities hold on their balance sheets, or the difficulties involved in increasing returns given the very low interest rates that are putting pressure on margins in the income statement.

Despite that, the agency considers that the banks may continue to offset this decrease in returns and the pressure on margins through the lower provisions that they are having to make, as a result of the reduction in non-productive assets, which is expected to continue over the next few years. S&P forecasts that the risk outlook for the financial sector will decrease, which will cause it to review its ratings. (…).

Original story: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: Carmel Drake

Hispania Gets Ready To Debut On The Bond Market

17 January 2017 – Cinco Días

The Socimi Hispania is planning to join the bond issues undertaken in recent months by other major players in the sector, including Merlin and Colonial, with the aim of diversifying its financing. To this end, it has already started to sound out the ratings agencies. Its objective is to obtain an investment grade rating for its securities.

Hispania Activos Inmobiliarios is studying the option of debuting on the capital markets with a bond issue to refinance some of its gross debt, which currently amounts to €631 million, according to sources familiar with the operation.

The Socimi has already started the process to request a rating from the ratings agencies, with the aim of launching the operation during the first few months of the year.

The firm has made contact with the three large players –Standard & Poor’s, Moody’s and Fitch–, although it will not need a rating from all of them, rather from just one of them or two at most. The aim is to achieve an investment grade rating – BBB – or Baa3 – , which would allow it to debut on the capital markets at a reasonable cost.

Hispania, in which the magnate George Soros owns a 16% stake, will thereby join the other bond issues undertaken recently by other companies in the sector.

The Socimi Merlin Properties – which forms part of the Ibex 35 – went to the market in October with a 10-year bond placement amounting to €800 million. The current yield on that debt is 2.3%. It has a Baa2 rating, which is one notch above the limit that separates junk bonds from investment grade securities, according to Moody’s nomenclature. Moreover, Merlin has assumed another €1,550 million in bonds from two bond issues made by Metrovacesa, with which it completed its merger at the end of October. (…).

Hispania’s current debt has an average maturity period of 7.2 years and €497 million of the balance is due to be repaid from 2022 onwards. The current average debt cost is 2.7%. Hispania also has hedges in place to avoid any surprises if interest rates rise. 96% of its debt is guaranteed. (…).

In general terms, the optimal balance sheet structure of these types of companies rests on three pillars: bank debt with an additional guarantee – in the majority of cases, properties from the company’s portfolio – , unsecured financial loans and listed debt.

With the proceeds that it raises from the bond issue, Hispania plans to repay some of its current debt balance. It would thereby take advantage of the good conditions in the market with liquidity and the environment of low interest rates. This company, created in 2014 under the special tax regime for Socimis, is led by Concha Osácar and Fernando Gumuzio, and is managed by Azora. In addition to Soros, its shareholders include the funds Fidelity, FMR, Tamerlane and BlackRock.

Hotel specialist

Hispania’s portfolio of real estate assets closed the third quarter of 2016 with an appraisal value of €1,680 million. The Socimi owns 36 hotels in Spain with 10,407 rooms. 68% of the value of those assets is located in the Canary Islands and 64% is managed by Barceló, with which it has signed a strategic alliance. The Socimi recently purchased three properties in the Cala San Miguel in Ibiza (pictured above) for €32 million.

Original story: Cinco Días (by A. Simón and R.M. Simón)

Translation: Carmel Drake

Moody’s Assigns Merlin An Investment Grade Rating

19 October 2016 – Expansión

The ratings agency Moody’s has granted Merlin a Baa2 rating, in other words, investment grade. The agency Standard & Poor’s (S&P) also assigned the Socimi’s debt an investment grade rating in February. Merlin is just a few days away from closing its merger with Metrovacesa, which will result in the creation of the largest real estate asset company in Spain.

This rating represents a boost for Merlin’s plans to return to the capital markets soon with a new bond issue. It placed bonds amounting to €850 million in April.

With this rating from Moody’s, the Socimi has become the highest rated Spanish real estate company. The agency highlighted the position of leadership that the Socimi will have in the Spanish market following its merger with Metrovacesa, as well as the diversity of its assets.

Original story: Expansión

Translation: Carmel Drake

Metrovacesa Refinances All Of Its Debt Ahead Of Its IPO

18 May 2016 – El Confidencial

Metrovacesa, the real estate company controlled by Santander, BBVA and Banco Popular, has managed to definitively emerge from the abyss into which it fell in 2009, when the then owner, the Sanahuja family, saw how the creditor banks enforced their guarantees for the €4,000 million that they were owed.

The company now chaired by Rodrigo Echenique, one of the strong men from the entity led by Ana Botín, has managed to reach an agreement with the creditor banks to refinance all of Metrovacesa’s financial commitments through bond issues and debt restructuring.

This week, the company will release €700 million in 6-year bonds onto the market with interest of 240 basis points. Once that test has been passed, Metrovacesa will restructure its remaining €1,100 million in financial commitments, an operation that may include another bond issue, now that it has received the ok from its creditor banks, with a similar term and margin.

With all of this homework done, the real estate company is completing an ambitious clean-up plan, which has led it to undertake: two capital increases in less than a year, for a total amount of €1,650 million; the carve out of its entire property development business into the recently created MVC Suelo; the sale of its logistics business; and a significant reorganisation of its shareholders, with Santander’s purchase of Bankia and Sabadell’s stakes, which allowed the Cantabrian entity to take over 70.27% of the group’s shares. (…).

Now, according to sources familiar with the company’s plans, once all of its debt has been restructured, Metrovacesa plans to return to the stock market, probably as a Socimi. Although no date has yet been set, they are working with a two year timeframe (…).

Proof of the good work done so far came in the form of the credit rating that the company obtained from the ratings agency S&P, which granted it a preliminary rating of BBB- and a stable long-term outlook, and Moody’s, which assigned it a Baa3 rating, also with a stable outlook. (…).

The resurgence of a giant

Following the carve out of its property development business, Metrovacesa has a portfolio of assets worth €4,300 million, primarily comprising office buildings for rent, although it also owns a sizeable package of shopping centres, a dozen hotels and more than 3,000 homes with a gross leasable area of more than 1.5 million sqm.

Those figures make it one of the giants of the reborn real estate business, alongside the Socimi Merlin, which led the return of property companies to the Ibex 35 following its acquisition of Testa, and Colonial, a mirror into which the company chaired by Echenique is looking to recover its past splendour and the only one of the large companies in the sector that has not converted itself into a Socimi, because the tax credits that it has eclipse the tax advantages of the new company structure.

Metrovacesa was excluded from the stock market in May 2013, after 72 years as a listed company and after seeing the creditor entities take control. Currently, Santander owns a 70.27% stake, BBVA a 20.52% stake and Popular a 9.14% stake. (…).

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

S&P Confirms Merlin’s Investment Grade Rating

21 April 2016 – El Mundo

Standard & Poor’s (S&P) has ratified the BBB rating that it assigned to Merlin Properties back in February, after the Socimi successfully closed its recent €850 million bond issue, according to reports from the company.

The ratings agency considers that Merlin’s investment grade reflects the “optimal risk profile” of the Socimi, which is further supported by a portfolio of property assets worth around €6,100 million.

The firm also assigns a stable outlook to the rating for the company led by Ismael Clemente, because it considers that its “large and diversified” property portfolio constitutes a “source of recurring revenue generation”.

“The assets are also well located, which allows the company to benefit from the recovery in the real estate sector that Spain is currently enjoying”, added the ratings agency.

The ratings firm has also assigned the same BBB rating to the €850 million bond issue that the Socimi recently placed. Through this operation, the company will restructure one tranche of the debt that it inherited from Testa when it acquired the company from Sacyr.

Moreover, S&P leaves the door open to a possible increase in Merlin’s rating, in the event that the Socimi adopts a “more conservative” financing policy, however it also warns of a downgrade in the event that its debt exceeds the threshold of 50% of the value of its assets.

Original story: El Mundo

Translation: Carmel Drake