SocGen puts EUR 1.8b performing loan book on the market

Société Générale Corporate & Investment Banking is gearing up to sell a EUR 1.8 bn European performing loan package as it seeks to strengthen its core Tier 1 capital ratios ahead of new regulatory requirements.

The French bank is understood to be looking for a buyer for a package consisting of 50 loans backed by assets in Central Europe (some 35% by value), Germany (25%), France (15%), Spain (15%), the UK (5%), and Italy (5%). Interested parties are said to include a number of insurance groups such as AXA Real Estate, which just announced it had raised a further EUR 2 bn of equity for its debt strategy, but also investment banks like Bank of America Merrill Lynch (BAML) and Deutsche Bank.

Well-informed market sources told PropertyEU that the lender approached potential buyers in mid-December, but warned that the process could take months before closing. 'With the portfolio consisting of 90% of syndicated loans, we expect the sales process to take a long time and to be quite difficult to complete because in some cases the party controlling the loan is not SocGen,' a source said.

Although SocGen is hoping to sell for a 10% discount to face value, markets experts say the package is likely to trade for a much bigger bargain. 'We expect a discount of some 25% to face value,' a source said, pointing to the fact that the vast majority of the debt was underwritten at the peak of the market in 2007 when property values were high and debt margins were very low compared to today.

Société Générale is also understood to be in the final stage of negotiations to sell two EUR 250 mln portfolios of nine non-performing and eight sub-performing senior loans backed by French and German assets, largely offices with a minority of retail. The packages were put up for sale in October last year and are expected to trade for a roughly 30% discount to face value. Closing is expected by the end of the first quarter of 2012.

SocGen announced in November last year that it was suspending new lending to European property indefinitely. The Paris-based bank owns EUR 4 bn of European real estate loans.