Tag: solvency

Civislend: A Pioneering Crowdlending Platform For RE Sector Is Born

14 November 2017 – El Mundo

Civislend is commencing operations in Spain. The Participative Financing Platform (PFP) is a pioneer in real estate crowdlending in Spain. Authorised by the National Securities and Exchange Commission (CNMV) and the Bank of Spain, its aim is to mediate between property developers and investors, streamlining the bureaucratic processes and simplifying all of the administrative procedures to raise funds quickly and safely in exchange for the payment of interest. The company aspires to become the leading portal for the financing of real estate projects.

Manuel Gandarias (pictured above), CEO of Civislend, defines the platform as “an effective meeting point between real estate developers looking for a source of financing that complements traditional bank lending and investors interested in obtaining an attractive return on their savings”. Gandarias insists that “Civislend does not substitute banking institutions, but rather provides sufficient resources to finance the land on which real estate projects are developed, whereby serving as a trampoline for the granting of property developer loans”.

The comprehensive risk analysis that Civislend carries out before publishing a project on the Marketplace is one of the best guarantees of success compared with other alternatives based on crowdfunding that already exist in Spain. “The strict control filters that we apply in Civislend reduce the risk of non-payment to the minimum, in order to ensure that investors are protected as much as possible”, says Gandarias.

First projects already underway

Civislend has just launched the fund raising phase for its first two projects, which can be viewed in the Marketplace. They are two 20-home residential complexes, located in Brunete (Madrid) and Tomares (Sevilla). Both have received a type A scoring, which means that investors may obtain an APR of 7.88% and 7.90%, respectively, over 20 months, with a minimum risk and the payment of interest every four months.

The whole process begins when a property developer requests financing. A preliminary study is carried out, which serves to check the firm’s solvency, as well as the suitability of the real estate project. Next, a feasibility study is conducted, which involves the performance of a due diligence, after which the project is granted a rating on the basis of its risk profile: minimum (A and A+), medium (B and B+) and moderate (C and C+). These guarantees are complemented by other actions such as the pledging of shares in the companies responsible for developing the project and the registration of charges (liens) over the assets, where appropriate.

Any savers looking to obtain returns from their funds, with a controlled risk, can invest in Civislend. After registering, investors may choose the project that interests them the most in the Marketplace and decide how much they want to contribute. Non-accredited investors may invest between €250 and €3,000 per project or up to €10,000 per year in all PFPs in Spain, whilst there are no limits on how much accredited investors can invest. The property developers who approach Civislend in search of financing may request up to €5 million. For projects amounting to less than €2 million, both non-accredited and accredited investors may invest; whilst for projects worth more than €2 million, only accredited investors may invest.

Gandarias points out that “depending on the scoring of the project, investors will receive an annual interest return of between 6% and 12%. (…).

Original story: El Mundo

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

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

Blackstone Puts €400M Of Catalunya Banc’s Mortgages Up For Sale

27 March 2017 – Expansión

The banks have put a red circle around 2017 in their calendars, as the year when the doubtful portfolios that have hurt them so hard in the past and that are still denting their balance sheets even now, will show signs of life. Some of the entities may end up generating more profits than they initially expected.

And Blackstone is leading the way. The US giant has created a securitisation fund containing some of the non-performing loans with a nominal value of €6,000 million that it purchased from Catalunya Banc in 2015 for almost €3,600 million. Two years later, and after restructuring many of the credits, the investment group has decided that the time has come to capitalise on its investment.

It will do so with the sale to investors of a portfolio containing €403 million of these formerly delinquent loans. It represents Blackstone’s second foray into this field. Last year, the firm opened fire with the first securitisation of structured loans in Europe, although now it is redoubling its efforts given that the volume up for sale is 52% higher.

The fund comprises 3,307 residential mortgages granted in Spain, with a loan to value (credit over the value of the home) of 60.9%. Almost 80% of these mortgages have been restructured and many of the borrowers are up to date with their repayments. Meanwhile, there has been no change to the rest, according to information that Blackstone has provided to Moody’s to allow the risk ratings agency to make its assessment.

Profits

Blackstone’s aim is to sell this portfolio to investors in order to materialise some of the gains obtained from the management of the non-performing loans. In all likelihood, the securitisation fund will be placed below its nominal value, but at a much higher level than Blackstone paid when it acquired the mortgages from Catalunya Banc, before the State intervened entity was acquired by BBVA.

In exchange, Blackstone will offer different coupons to investors, depending on the type of mortgages that they take on.

The fund has been divided into five tranches, depending on the risk. The first has a very high level of solvency and so will pay annual interest of 3-month Euribor plus a spread of 0.90%.

The second and third tranches, which still have high or intermediate solvency ratings, will pay premiums over Euribor of 1.9% and 2.5%, respectively. The fourth tranche is ranked below investment grade and will pay a return of 2.6%.

The objective of Blackstone and the three banks that it has engaged for the securitisation (Credit Suisse, Bank of America Merrill Lynch and Deutsche Bank) is that the operation will be completed next week.

A new market

This second securitisation by Blackstone is clear confirmation that a new market has opened up for buyers of delinquent portfolios from the banks. In fact, sources from several investment banks are confident that there will be a significant volume of secondary operations of this kind this year, where the new owners of the bank’s non-performing loans will sell their positions to other funds and to the market alike, through securitisations. (…).

Original story: Expansión (by Inés Abril)

Translation: Carmel Drake

Abanca Sells €1,400M NPL Portfolio To EOS Spain

14 June 2016 – Expansión

Two years after taking ownership of Abanca, the Venezuelan company Banesco has started to sell off the bank’s toxic assets. Yesterday, the financial entity headquartered in Galicia reported its first sale of non-performing loans, amounting to €1,385 million, which represents approximately 20% of its total NPL portfolio.

All of the loans were overdue and unsecured, which makes it one of the largest operations of its kind in recent years and also, concentrated in a single buyer.

EOS Spain, a company that specialises in collections management was the winner of the competitive process. It is headquartered in A Coruña and is a subsidiary of the international group EOS. The transaction generated profits of €57.4 million for the bank, according to a statement filed with the CNMV.

The auction generated significant interest, with participation from around twenty investment funds and entities specialising in the recovery of overdue debt. For this competitive process, Abanca was advised by KPMG, the same firm that audits its accounts.

The operation (…) will open a series of future transactions as part of Abanca’s strategy to divest of its non-performing assets. In fact, it says that it is already evaluating similar operations for its non-strategic assets, with the aim of focusing the business on providing credit to families and companies and to boosting the economy.

One of the upcoming operations will involve a portfolio of non-performing loans, secured by mortgaged assets, although that will be smaller than the portfolio just sold. By contrast, the bank will hold onto the other overdue unsecured loans so that they can be managed by Abanca itself.

For EOS, the purchase “represents the strengthening of its relationship with Abanca”, according to a statement from the bank, as well as an intensification of competition and an improvement in its position in the domestic market.

Improved capitalisation

The main effect of the sale has been on the solvency of the entity, given that it had fully provisioned all of the non-performing loans that it has now sold. Abanca calculates that with this transaction, it has improved its capital coefficient by five basis points since the first quarter of the year, when it stood at 14.8%, one of the highest in the sector. Meanwhile, the doubtful asset coverage ratio amounted to 60.8% during that same period. According to the annual accounts, Abanca had decreased its doubtful debt balances by 30% last year to €2,695 million as at December 2015; furthermore, it reduced the weight of foreclosed assets on its balance sheet to just 1%.

Of the total impaired asset balance, more than half (€1,900 million) are secured and only €114 million were overdue by three months or less (as at December 2015), according to details disclosed in the consolidated annual accounts for 2015.

Beyond its consolidated balance sheet, the entity accounted for €5,376 million of financial assets that it had written off. The bank explained that it was not including them on its balance sheet because it regarded (the likelihood of) “their recovery to be remote”, although it clarified that it has not stopped trying to collect the amounts due.

Original story: Expansión (by A. Chas and J. Zuloaga)

Translation: Carmel Drake

Demand For Off-Plan Homes Returns As Stock Runs Out

6 June 2016 – El Economista

The purchase of off-plan homes has returned to the stage after years of lethargy, driven by: the absorption of residential stock in many areas of Spain; the need for new homes; the improvement in the economy and in future employment; and the clear recovery of the real estate sector.

According to the President of the property developers’ association APCE, Juan Antonio Gómez-Pintado, the “stock” of homes, which has weighed down (on the sector) since the crisis, has been gradually absorbed and in certain areas, such as Madrid, Barcelona and the Costa del Sol, it is practically non-existent. (…).

The market, in general, has a view that residential stock has disappeared in many areas, leading to the activation of prices and the construction of new homes, said the CEO of Quabit, Javier M. Prieta. He added that housing permits soared by 42.5% in 2015, whereby confirming the need for new homes.

Exponential growth

Since 2013, the number of off-plan purchases has grown exponentially, especially in the medium-high and high end residential segment, according to the Director of the Development at Gilmar, Óscar Ochoa, who highlighted that after many years of crisis, there is a latent demand for newly built homes.

At present, buyers are looking to purchase homes to reposition themselves, say sources at Tinsa, who consider that one of the major challenges in the residential market will be to achieve the recovery of the employment market and the conditions that allow for that pent-up demand to become solvent.

Sources at Neinor Homes have also observed a significant revitalisation of the market in the last year and assure that off-plan buyers are looking for a type of home that has not been built yet or that was hard to find until now. Clients are very demanding and well-informed about what their homes should be like.

The property developer Vía Célere has also detected a substantial increase in off-plan sales, both in Madrid, where 90% of Residencial Célere Adelgas II has been sold with still a year to go before it is completed, and in Barcelona, where half of Residencial Célere Magoria, which was launched at the end of 2015, has already been sold.

These are clients who do not need a home in the short term and who are able to invest more in exchange for a new home in which they will not have to invest anything over the long term, said the Director of Gilmar. (…).

Clients who buy off-plan should always verify that the project has a building licence, that the contract includes a delivery date and that the amounts paid during the construction process are guaranteed by some kind of insurance policy or aval, say sources at APCE.

In terms of the benefits of buying off-plan, price is a fundamental aspect, as well as the possibility of customising the home, say sources in the sector.

Sources at Tinsa, APCE, Quabit, Gilmar, Vía Célere and Neinor all agree that off-plan buyers should only purchase from transparent and solvent firms with experience in the sector, and they recommend steering clear of apparent bargains. Off-plan buyers should also check that the property developer in question already owns the land on which the property is going to be built or that an aval has been constituted for the entire development.

Off-plan buyers should also demand a guaranteed individual aval to allow them to recover monies paid in the event that their homes are not handed over in the end.

Original story: El Economista

Translation: Carmel Drake

Banks Still Own Problem Assets Amounting To €213,000M

5 May 2016 – Cinco Días

Spain’s banks still have a heavy burden weighing down on them following the burst of the real estate bubble: they now own foreclosed assets worth €84,000 million, taken on since the start of the crisis.

According to the Bank of Spain in its financial stability report, published on Wednesday, that figure “has remained stable since December 2012, always ranging between €75,000 million and €84,000 million”.

Of that amount, 37.6% relates to land, 25% to finished buildings, 22.3% are foreclosed assets resulting from the acquisition of homes, and 5% are buildings under construction.

In the last year, land has decreased by 0.5 points, finished buildings have dropped by 0.43 points, homes have increased by 1.8 points and buildings under construction have remained stable.

But beyond these properties, the banks’ exposure to non-performing assets and problem loans amount to almost €213,000 million in Spain’s financial sector as a holw.

The banks have lots of “non-performing assets on their balance sheets, which do not generate any revenues for the income statement, but which do require financing”, said the financial supervisor, which has published data relating to 2015 year-end.

“A hindrance to solvency”

The Bank of Spain also warns that “although these two indicators have decreased, by 14.5% as a whole, over the last year, they still represent a significant percentage of the total assets of the banks in their business in Spain and they place negative pressure on the income statements of the entities, reducing their profit generation capability and therefore, representing a hindrance to increasing the solvency of the institutions”.

In terms of total loans that have been refinanced or restructured, that balance amounted to €205,000 million at the end of last year, which represents a YoY decrease of 6.4% compared with the end of 2014.

Of the total amount of loans whose initial terms have been adjusted, “51.5% relate to non-financial companies and 46.2% to households”, said the Bank of Spain.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake

Echegoyen Confirms That Sareb Will Have To Convert Debt

20 October 2015 – Expansión

The President of Sareb also announced that the entity will increase the number of social housing properties (from 2,000) to 4,000.

Yesterday, at a meeting of the Senate’s Finance Committee, the President of Sareb, Jaime Echegoyen, discussed the recent developments to affect the so-called ‘bad bank’, which announced its results for the first half of the year last Friday, reporting a reduction in losses of 23%.

Echegoyen confirmed that the application of the new accounting standards, defined by the Bank of Spain’s Circular published in September, will affect the solvency of Sareb. The new standards require Sareb to assign an individual market value to each one of the entity’s assets, with the consequent need for new provisions. However, the President confirmed that the group’s convertible subordinated debt, amounting to €3,600 million, will be more than sufficient to cover this eventual hole in its solvency.

The senior executive of Sareb also acknowledged that the hiring of third parties to manage the asset portfolio slowed down sales processes during the first half of the year, due to the complexity and length of time involved in the process to materially transfer the management of those assets. Nevertheless, he appeared confident that the cruising speed of sales will be recovered again during the second half of the year.

During the first half of the year, revenues decreased by 10%.

When questioned by several senators about the hedging swap contracted by Sareb in 2013, Echegoyen explained that this contract would mature in 2022. Until then, all profits and losses associated with it are “theoretical”, since the actual result will only be known upon maturity. Nevertheless, the banker commented that during the first half of the year, the contract generated theoretical gains of €400 million.

Social housing

Echegoyen also used his appearance to announce that Sareb has increased its stock of social housing available to autonomous regions from 2,000 to 4,000 homes. That means that the bad bank is making available an additional 2,000 homes to the regional administrations.

Currently, Sareb has collaboration agreements in place in Cataluña, Aragón, Galica, País Vasco and the Balearic Islands and is waiting to sign two more in the Canary Islands and Castilla y León. The President added that the entity is also in advanced talks with Castilla La Mancha, Valencia, Cantabria and Madrid and he announced that discussions have also begun in Andalucía, Asturias and Extremadura.

Original story: Expansión (by M.R.)

Translation: Carmel Drake