Commerzbank picks buyer for Spanish loan package

Commerzbank has reportedly picked a preferred bidder for its €4.4 bn Spanish commercial property loan portfolio.

According to well-informed market sources, a joint venture between JP Morgan and Lone Star has been selected as the winning bidder for the book, which consists of roughly half of performing and non-performing loans.

The offer price is believed to reflect an average discount of between 25 and 30% to face value.

The sale, codenamed Project Octopus, is expected to be one of the largest Continental European loan disposals this year. JP Morgan is expected to take control of the performing loans whilst Lone Star will take on the sub and non-performing loans.

All companies declined to comment.

Other bidders for the package included Blackstone and Deutsche Bank, which are understood to have missed by little in a remarkably close bid. Cerberus Capital Management with financing from Credit Suisse as well as Apollo Global Management and Santander, with financing from Bank of America Merill Lynch also tabled an offer.

According to market sources, the loan portfolio contains some of the best quality assets to come to market in the recent past. It includes some 200 credit facilities, including loans backed by around 40 shopping centres owned by renowned companies such as Unibail Rodamco, Robert de Balkany’s LSGI Group, Testa, and Doughty Hanson.

The portfolio also includes offices including Testa’s portfolio as well as hotels and high street units. A majority of the commercial assets are outperforming, sources said.

Commerzbank put the package for sale last year through investment bank Lazard as part of plans to liquidate its property lending business Eurohypo, currently known as Hypothekenbank Frankfurt.

In 2012, Commerzbank clinched Europe's largest loan sale with the disposal of its UK loan book with a face value of some €5 bn to Wells Fargo and Lone Star for an average single-digit discount.