US investment firms Davidson Kempner, Bain Capital and Fortress are seen as the strongest contenders in the race to acquire the mezzanine notes of a massive non-performing loan (NPL) portfolio of mainly residential mortgages being offloaded by the National Bank of Greece.
According to well-informed market sources, the package known as Project Frontier has drawn major interest and is expected to receive up to half a dozen non-binding offers by a March 2 deadline, which has already been extended twice.
Contrary to other similar mammoth transactions such as Project Cairo, the portfolio is being sold without a servicing arm, meaning bidders will either need to have their own servicing arm or will have to join forces with a servicer.
The €6 bn securitisation - the largest NPL portfolio sold by NBG to date - was put on the market through Morgan Stanley in early 2020. NBG is believed to be selling the mezzanine tranche of the securitisation while looking to retain most or the entirety of the senior and junior notes. The portfolio is believed to be highly appealing for many investors as it includes a vast majority of residential property-backed loans (around 80%), some industrial assets (16%) and a small portion of development land (4%).
Market experts estimate that the portfolio could sell for 25 to 30% of its gross asset value. ‘I believe pricing for this kind of portfolio hasn’t moved anywhere in Europe,’ said a market expert, noting that similar deals in the recent past have closed at 25% of nominal value. Despite the challenges posed by both the pandemic and the portfolio size, investor interest for these assets remains strong, he added. ‘Also, the Greek lenders are trying to shift old NPL portfolios in view of the new batches arriving.’
If successful, the sale would reduce NBG’s non-performing portfolio exposure by two-thirds.
Earlier this week, the Greek lender completed the sale of the Project Icon package encompassing 7,300 loans to 1,500 small and medium enterprises (SMEs) and micro enterprises with a principal of €1.6 bn to Bain Capital.
NBG, advised by Morgan Stanley, launched the sale in September 2019. The package was said to be of a lower quality than previous NPL packages for sale and was expected to sell for less than 25% of nominal value.
In 2019 NBG also closed the sale of Project Symbol to a consortium of Centerbridge Partners and Elliott Advisors.
Other major portfolio about to change hands
Project Frontier is not the only NPL portfolio about to change hands in Greece. PropertyEU has learned that Piraeus Bank, Greece’s largest lender by assets, is in talks with Swedish debt specialist Intrum to sell Project Vega, a €6 bn non-performing loan portfolio.
Intrum is a major partner of Piraeus Bank. In 2019, it teamed up with the Greek lender to set up a platform to service a €27 bn bad loan portfolio. It agreed to pay €328 mln to acquire 80% of it, with Piraeus bank holding 20%.
Last year Intrum also bought a stake in the €1.9 bn Project Phoenix residential mortgages NPE securitisation from Piraeus.
