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

Bankinter Revives Fixed Rate Mortgage War

9 June 2016 – Expansión

A new battle has commenced in the war between the banks to grant fixed rate mortgages. One of the most active entities in the commercial supply of these products, Bankinter, is redoubling its efforts. Yesterday, the bank announced widespread cuts in interest rates on its 5-, 10-, 15- and 20-year mortgages. Bankinter, whose fixed rate mortgages were already amongst the most competitive in the market, has cut the interest rate on its ten-year home loans from 1.75% to 1.6%; on its fifteen-year home loans from 2% to 1.8%; and on its twenty-year home loans from 2.3% to 2.1%.

The zero interest rate environment in the Eurozone has led the banks to offer fixed rate mortgages, given that 12-month Euribor, which is the index to which most floating rate mortgages are linked, is trading at negative rates (-0.018%). In this context, it is more profitable for the banks to offer fixed rate mortgages, given the limited margin they are able obtain on their variable rate products.

The main advantage for customers is that they know the amount of interest they will have to pay on the day they take out the mortgage; that figure is fixed and will not vary for the duration of the mortgage term. In other words, clients are protected against possible interest rate rises, although they would not benefit from any further hypothetical decreases.

Bankinter’s fixed rate mortgage has an arrangement fee of 1%, with a minimum of €350. It also charges a penalty of 0.5% during the first five years of the life of the loan in the event of its total or partial repayment, and of 0.25% thereafter, as well as a commission of 0.75% to offset the interest rate risk, in the event that the early repayment generates a loss of capital for the entity.

If Bankinter’s fixed rate mortgages are taken out to purchase a primary residence, then the value of the loan may not exceed 80% of the purchase price or appraisal value (the lesser of the two amounts). If the product is requested for a secondary residence, then the limit is 60% of the lower of those two values.

In addition, in order to benefit from these interest rates, the bank requires its borrowers to receive their salary into their Bankinter account, as well as to take out life assurance and home insurance with the entity. The applicable interest rates are higher if these products are not contracted.

The reductions also apply to the fixed element of Bankinter’s 15- and 20-year mixed (fixed and floating) rate mortgages, which decrease to 2% and 2.3%, respectively.

Original story: Expansión (by A.R.)

Translation: Carmel Drake

Hotelbeds Borrows To Finance Its Own Purchase (By Cinven & CPPIB)

8 June 2016 – Expansión

Hotelbeds has had new owners for just over a month. At the end of April, the private equity firm Cinven and the Canadian fund CPPIB won the bid opened by TUI to sell the Spanish travel services supplier. They put a joint offer on the table, valuing the company at €1,165 million, which exceeded all of the other bids. Now, they are holding negotiations regarding how they will pay that price.

All indications suggest that the target company will end up paying a large portion of the bill itself, in a debt operation that is typical in private equity acquisitions. According to several financial sources, Hotelbeds is in conversations with seven banks to obtain financing, including a syndicated loan amounting to €490 million and a line of credit amounting to another €150 million.

BBVA, Morgan Stanley, HSBC, UniCredit, Deutsche Bank, Bank of Ireland and Mizuho are the entities participating in the syndicate, which is expected to be closed within the next few days and whose fruits will be used to pay for some of the acquisition.

Neither the purchaser nor the vendor has provided details about how much of the €1,165 million value assigned to Hotelbeds will be paid for in debt and how much will be paid for in cash, but some of the parties involved implied that the latter will account for more than half of the total price. Using that reference and the fact that Cinven and CPPIB are not purchasing 100% of the company, rather some of its shares will remain in the hands of the travel services supplier’s management team, then it seems likely that the €490 million syndicated loan will cover a significant part of the total financing.

Hotelbeds will pay at least 500 basis points (5.5%) above Euribor for the syndicated loan, which will have a seven year term, according to financial sources. That spread was the maximum established to begin negotiations, so it may decrease, depending on the banks’ appetite and the conditions offered by the company.

The same thing will happen with the €150 million line of credit. In that case, the term will be six years and the minimum spread will amount to 450 basis points, but the definitive conditions will not be agreed until the negotiations have been finalised. (…).

Hotelbeds’ financial results work in its favour with respect to its negotiations with the banks, according to financial sources. The supplier works with 75,000 hotels in 180 countries and recorded a turnover of €1,200 million in 2015 and an EBITDA of €117 million. In addition to hotel rooms, the company also manages transfers, trips and corporate events.

Original story: Expansión (by Inés Abril)

Translation: Carmel Drake

Sareb Refinances Half Of Its Debt To Reduce Its Interest Payments

9 March 2016 – Expansión

Sareb has reduced its financial burden by refinancing half of its debt in just two months. The bad bank is taking advantage of the historically low interest rates to save itself €150 million in interest payments, a key reduction at a complex time for the entity. In addition, the entity chaired by Jaime Echegoyen is finalising the repayment of debt amounting to around €2,000 million, in line with its objectives.

On 18 December 2015, Sareb launched a debt issue amounting to €10,268 million, with a one year term, and a further €6,574 million with a three year term. And two weeks ago, it closed another two operations amounting to €4,084 million and €2,537 million, also with one- and three-year terms, respectively. In total, these sums account for €22,565 million of its debt balance, which currently amounts to almost €45,000 million.

As a result, Sareb is going to see a sharp reduction in its financing costs, which, according to financial sources, will amount to almost €150 million.

In this way, the company’s financing cost will decrease from €1,100 million in 2013 to its current figure of close to €550 million.

In addition, sources close to Sareb’s Board of Directors indicate that this reduction will allow the entity to continue repaying its debt, between €2,000 million and €2,500 million to be specific. They expect that the firm chaired by Jaime Echegoyen will publish its annual accounts for 2015 at the end of this month, which will reflect some of this reduction in costs. During the first half of 2015, the significant cut in interest rates, thanks to the measures implemented by the European Central Bank (ECB), pushed financing costs down to €360 million, i.e. €194 million less than a year earlier.

A balm

The decrease in Euribor has served as a balm for Sareb in the face of the (temporary) suspension in real estate sales in 2015 – due to the migration of its assets – and the impact of the new accounting circular, which is going to force it to exchange two thirds of the subordinated debt that its shareholders hold. Before this new accounting standard, Sareb had already accumulated losses of €850 million during the first three years of its life.

Sareb was created in 2012 with debt of more than €50,000 million, which was granted to the ceding entities as payment for the transfer of their assets. These issues were placed over terms of 1, 2 and 3 years, and were linked to 3-month Euribor plus a spread.

The company launched its first bond issue at the end of 2012. It placed €16,512.6 million at 3-month Euribor plus a spread of 256.2 basis points. For the issues completed in February, that margin had decreased to less than 30 basis points above the same reference rate. In addition, Euribor is now in negative territory, even on a 12-month term. The 3-month reference rate for issues by the company amounts to -0.21% Even if this reference rate continues to fall, negative interest rates will never be applied by Sareb. (…).

The cut in the financing cost would have been greater if it wasn’t for an interest rate hedging instrument that Sareb took out for a 9-year term to cover 80% of those senior debt issues. (…). .

Original story: Expansión (by D. Badía and J. Zuloaga)

Translation: Carmel Drake

CaixaBank Places €1,500M 7-Year Mortgage Bond Issue

2 February 2016 – Cinco Días

The bank chaired by Isidro Fainé…has placed a 7-year mortgage bond issue amounting to €1,500 million. The entity has been helped by Barclays, Goldman Sachs, Société Générale and UBS.

CaixaBank has placed the debt issue at a price of 78 basis points above the 7-year midswap rate (the risk free interest rate corresponding to that term), slightly below the reference rate of 80 basis points sought at the beginning of the placement. The coupon has therefore been left untouched at 1%.

Demand for the issue has amounted to more than €2,500 million, with more than 125 investors expressing interest in it, of which a significant number were foreigners. This has allowed the entity to reduce the price of the issue. CaixaBank’s last debt issue, which was placed on 4 November 2015, amounted to €1,000 million. It had a five-year term and a coupon of 0.625%. The entity is strengthening its surplus liquidity, which amounted to more than €54,000 million at the end of last year.

Spanish banks are rushing to raise funds on the capital markets. In January, BBVA placed a 5-year senior debt issue amounting to €1,000 million; meanwhile, Bankia placed mortgage debt amounting to €1,000 million; Santander issued 10-year bonds for the same value; and Deutsche Bank issued bonds amounting to €500 million with a 7-year term.

Santander achieved a price of 65 basis points over the midswap rate – the reference index for this kind of debt issue – on its placement. It will pay a coupon of 1.5%. Mediobanca, Natixis and Nomura accompanied the Santander group in the management of the operation.

Javier González, Head of Debt Issues by Financial Entities at BNP Paribas, which participated in the placements of BBVA, Bankia and the Treasury, confirmed that the money invested in these operations has been coming from end investors, such as investment and pension funds.

Banco Santander and Bankia have chosen to issue mortgage bonds because the volatile environment makes this type of asset very popular with conservative investors.

Original story: Cinco Días (by Pablo Martín Simón)

Translation: Carmel Drake

Santander Reduces Its Mortgage Spread Further, To 1.49%

18 March 2015 – Expansión

The second reduction of the year / The entity has decreased its spread over euribor on its mortgages from 1.69% to 1.49%, to match ING’s offer.

Santander has reduced the cost of its mortgage once more to place its product amongst the most attractive in the market, as the all out war continues in the sector. For the second time this year, the group has reduced the interest rate on its home loans: the rate paid (by borrowers) during the first year hereby falls from 2.45% to 2%; and from the second year onwards, the spread over euribor decreases from 1.69% to 1.49%.

With this move, Santander is now positioned in line with the strategy of (many of) its competitors such as ING, Bankia and Bankinter, which have all lowered the spreads on their mortgages to around 1.5% over the last month and a half. However, it does not match the rate of 1% being offered by Kutxabank, the lowest in the sector.

To obtain these conditions, clients must hold various products with the bank. Mortgage holders will have to receive their salaries in their accounts with the entity and they must earn a minimum monthly income of €2,000. In addition, mortgage holders must pay three bills (direct debits) from their Santander accounts, use the bank’s cards, and also take out home and life insurance policies with the entity.

Mortgages have become a key product for Santander in its efforts to achieve its main goal: namely, to increase the loyalty of its customers. Mortgage (marketing) campaigns targeted at individuals and Project Advance, which focuses on SMEs are the ‘hooks’ with which Santander is seeking to attract and retain customers in Spain, which currently number 12.6 million.

The entity’s mortgage portfolio in Spain amounts €47,000 million. Although the new loan book grew by 64% in 20134, its total stock decreased by 5.8% last year, from €50,000 million at the end of 2013.

Santander holds a market share of 10.2% in the mortgage sector in Spain, having gained 0.2 points between January and November 2014, according to the latest data presented by the bank. This falls below its market share of the Spanish loan sector (in general), which amounts to 13.5%.

Original story: Expansión (by M. Martínez)

Translation: Carmel Drake

Sareb’s Financing Costs Will Be €400m Lower In 2015

19 February 2015 – Expansión

Good news for Sareb. The company has not yet published its accounts for 2014, since it is still waiting for the Bank of Spain to define its accounting framework and whereby determine its final results. But the company, chaired by Jaime Echegoyen (pictured), has taken an important step that will help to improve its results in 2015, its third year of operation.

The bad bank has just renewed the debt that it raised to pay the rescued savings banks for the properties and developer loans that they transferred. Instead of cash, Bankia, Novagalicia (now Abanca), Catalunya Banc, Banco de Valencia, BMN, Liberbank, Banco Caja Tres and Ceiss received senior bonds backed by the State.

The bonds, whose interest rate is linked to 3-month Euribor and the spread on Spanish debt, had maturity dates of one, two and three years and are renewed automatically. The debt relating to the entities classified in the so-called Group 1 (the larger ones) was renewed in December and now (in February) it has been the turn of the Group 2 entities.

Thanks to improved market conditions, in particular, the decrease in the risk premium on Spanish treasury bonds, Sareb has significantly reduced the yield on these senior bonds to the extent that the average spread on its debt portfolio has fallen from 1.954% to 0.832%.

In this way, Sareb will reduce its financing costs by €400 million in 2015, according to the institution’s official calculations. In other words, with the renewal of this debt, the former savings banks will no longer receive this amount for the real estate assets they transferred to the bad bank, which will have a negative impact on their net interest income this year.

The decrease in the interest payments on this debt would have been even greater without the coverage that Sareb contracted over 85% of the portfolio through a swap, which establishes a fixed interest rate regardless of the evolution of Euribor. In this way, it protects its results from upwards movements in the base rate, but it also mitigates the positive effects of any downwards movements.

Repayment of €5,416 million

Sareb’s financing costs have also been reduced by the repayment of debt. The bad bank issued €50,781 million in bonds when it was created to pay the savings banks for their assets. Since then, thanks to the income generated from the sale of properties and loans, it has repaid €5,416 million of that balance.

The amount of debt repaid in 2014 exceeded the initial expectations of €3,000 million by more than €400 million. And Sareb expects that it will exceed its bond repayment forecasts this year as well, although it has not yet shared these forecasts with the market.

“Sareb is fulfilling its main objective, which is to manage and sell its portfolio of assets without generating higher costs for the taxpayer”, said the Chairman of the bad bank in the first ordinary meeting held by the Board of Directors in 2015.

His predecessor in the role, Belén Romana, used to repeat the mantra that reducing its own financing costs was one of Sareb’s priorities to pave the way towards sustainable profitability. Its financing costs amounted to €1,272 million in 2013 and decreased to €1,135 million in 2014. In all likelihood, this downwards trend will only accelerate from here on in.

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake

ING España’s Mortgage Portfolio Increased By 5% In 2014

12 February 2015 – Expansión

ING Direct España increased its client portfolio and balance sheet again last year. The bank was the only entity that managed to increase its mortgage book, with an increase of 5.1% to €9,949 million. It is offering one of the best mortgages in the market, having lowered its spread over Euribor to 1.49%.

The growth in its portfolio of other loans was even more significant; it rose by 29.7% to €961 million. ING Direct launched a new strategy in September 2013 to gain a foothold in the SME segment. As a result, its balance sheet increased by 12.3% to €25,277 million in 2014, whilst its funds and pension plans soared by 45.8% to €4,148 million. Its client portfolio in Spain grew by 7.3% to 3.1 million.

Despite these figures, ING Direct España’s bottom line for the year is unknown, since the Dutch entity does not provide a breakdown of its gains and losses by country.

At the global level, the group made a profit of €1,251 million in 2014, down by 64.7% due to extraordinary items and a change in the perimeter. Excluding the impact of extraordinary items, its net profit amounted to €3,424 million, i.e. 8.5% more than in 2013.

ING finished paying back the aid it received during the crisis (€10,000 million) in 2014, and so it announced yesterday that it will begin paying dividends to shareholders again, with the first payment of €0.12 per share being disbursed in May. Yesterday, ING’s shares increased by 3.62% to €11.62.

Original story: Expansión (by M. Romani)

Translation: Carmel Drake

Sareb Will Issue €10,189m In Senior Notes On 9 Feb

30 January 2015 – Expansión

On 9 February, the Asset Management Company for Bank Restructurings (Sareb) will issue two sets of senior bonds amounting to €10,188.8 million in total, according to the Official Bulletin of the Commercial Registry (BORME) published today.

In its first appeal to the market this year, Sareb will make two issues, one amounting to €4,084.7 million and the other amounting to €6,104.1 million.

In both cases, the nominal value of the bonds will be €100,000 each and the interest rate will be three-month Euribor plus a spread.

The subscription period, for both issues, will run from 12:00 until 14:00 on 13 February and will terminate on 28 February.

Original story: Expansión

Translation: Carmel Drake

Banco Popular Launches New Mortgage

20 January 2015 – El Mundo

Banco Popular has launched its new mortgage offer into the market, with spreads of around 1.5% for both its branch network and online subsidiary, Oficina Directa. The entity is offering the Hipoteca Premium in all of its branches, with a spread of 1.59% above Euribor. The product has a fixed interest rate of 2.4% for the first year.

Original story: El Mundo

Translation: Carmel Drake