Blackstone buys €6.4b Spanish resi debt package at 44% discount

US asset management giant Blackstone has emerged as the winner of the €6.4 bn 'Hercules' portfolio of Spanish residential non-performing loans being sold by Catalunya Banc, in a deal backed by state funds.

Blackstone is believed to be paying €3.6 bn for the package, outbidding a rival bid led by Oaktree and including also Pimco, Deutsche Bank, Marathon and Finsolutia.

Catalunya said in a statement that the book value of the package of mortgages, almost half of which are in default, is €6.39 bn and it has set aside provisions of €2.20 bn. The price would mark a discount of 44%.

As part of the deal, Spain's Fund for Orderly Banking Restructuring (FROB) will create a €4.19 bn asset securisation fund backed by the Catalunya Banc mortgages and owned jointly by Blackstone and the Spanish state. FROB will invest €572 mln in the deal.

The package is believed to include €2.6 bn of performing loans, €2.7 bn of non-performing and €1.1 bn of sub-performing loans.

Blackstone will service the loans through its Anticipa Real Estate – the former CatalunyaCaixa Inmobiliaria platform acquired in April.

Catalunya Banc, which was nationalised in 2011, was advised on the deal by N+1 and Baker & Mckenzie.

The deal was signed on the same week that final bids are due for Catalunya Banc, in an attempt to make the troubled lender easier to sell. The government hopes to close the disposal of Catalunya Banc for above €200 mln by the end of July.

It is the second multi-billion loan disposal in Spain within weeks. In June, US-based private equity firm Lone Star and investment bank JP Morgan acquired Commerzbank’s €4.4 bn Iberian loan book at a 20% discount to face value.

The sale, codenamed Project Octopus, involved non-performing loans in Spain and in Portugal as well as perfoming loans in Spain which are understood to have been sold for a total of €3.5 bn, reflecting a blended discount to face value of 20%.

Dallas-headquartered Lone Star is believed to be paying €1.5 bn for the NPL book while JP Morgan is forking out €2 bn for the performing part, according to those who track the market. Commerzbank is also transferring its Spanish platform and employees to Lone Star.

According to Jörg Schuermann, head of corporate finance at JLL in Germany, US private equity groups typically snap up large loan portfolios like this due to their sheer size and because ‘they feel comfortable going after these portfolios’.

Spanish bad bank Sareb has recently put a large residential debt portfolio for sale, in a process called Project Pamela, while another €1 bn of residential NPLs under the name of Project Kaplam was put on the market in early July.

Spain has seen over €3.2 bn of commercial real estate loan trades in 2014, versus €5 bn of investment in real estate assets, according to data from CR Investment Management.