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

Moody’s Warns Of Higher Default Risk For Restructured Mortgages

11 November 2016 – Expansión

Yesterday, the ratings agency Moody’s issued a warning about mortgages that are being restructured, which represents an increasingly larger pool, thanks to the economic recovery and the proliferation of real estate management platforms. In the entity’s opinion, several variables may lead to an increase in the risk profile of these assets. Specifically, restructured mortgages are more risky when: the mortgage term is extended; grace periods are granted for the payment of interest or the repayment of the principal; interest charges are reduced; and other modifications are made.

This warning comes just a few weeks after Blackstone created the first securitisation fund in Europe containing restructured loans, amounting to €265 million. It created the fund using mortgages that it purchased from Catalunya Banc at the beginning of 2015. Nevertheless, it only included loans that borrowers have been repaying normally, without any help, for more than 37 months.

Analysts at Moody’s consider that foreign residents in Spain are twice as likely to default on their loans than Spaniards. “A defaulted payment by a foreigner on a Spanish loan does not have any impact on his credit history in his country of origin; and clearly, that reduces the incentive for him to seek solutions to repay his debt”, say the experts. In turn, the risk of default is 30% higher for borrowers who have restructured mortgages over secondary residences compared with those who have restructured mortgages over primary residences.

Moody’s has also conducted analysis by geographic region and in this sense, its results are clear: borrowers who have restructured mortgages for homes on the coast are almost twice as likely to default than borrowers with restructured mortgages in Madrid.

The default rate

Meanwhile, Axesor forecasts that the default rate for loans to families and companies will close the year at 8.96%, which would bring it below the 9% threshold for the first time since May 2012. The balance of doubtful debts amounted to €116,613 million in August, which represented a YoY decrease of 17.58%, and that figure is expected to continue to fall at a double-digit pace, which means that we could close the year with a doubtful debt balance of around €110,051 million.

Original story: Expansión (by D.B.)

Translation: Carmel Drake