CatalunyaCaixa confirms the sale of its €6.4 billion high risk mortgages to US Blackstone

Barcelona (ACN).- CatalunyaCaixa (CX) on Thursday confirmed the sale of its portfolio of high risk loans to US investment company Blackstone, consisting mainly of mortgages with a nominal value of €6.392 billion and provisions of €2.205 billion. The transaction involved the transfer of funds to a portfolio of asset-backed securities for an amount equal to its book value, €4.187 billion, with €3.615 billion supplied by Blackstone and Spain's public  Fund for Orderly Bank Restructuring (FROB) providing the remaining 572 million. With this divestment, the CX solvency ratio stood at 14.9% and coverage stands at 81.6%. After this sale, the liquid assets of CX will reach €16.848 billion and the company is now ready to face its full privatisation, after it was nationalised in 2012. Besides, in early June, CX completed the sale of its estate investment platform to the Blackstone Real Estate fund for as much as €40 million. The operation included a volume of loans and real estate assets worth €9 billion, owned by CatalunyaCaixa and Sareb, Spain's public 'bad bank' managing toxic assets. June’s sale also agreed to maintain the 151 employees on the real estate platform, which became separated from the bank and was integrated into the investment company.

CX was founded on 1 July 2010, through the merging of Caixa Catalunya, Caixa Tarragona and Caixa Manresa, in the first wave of bank restricting operations in Spain. Formerly Catalonia’s second largest savings bank, it was nationalised in late 2012 following the collapse of the real estate sector and the loss of value of many of its assets. It is now run by the Spanish Government and the Bank of Spain through the FROB, which has repeatedly tried to sell the bank back into the private sector in the last few months.   

Blackstone won a tender with 12 initial contestants

The portfolio that has been purchased by Blackstone this July, composed mainly of mortgage loans, has attracted strong interest from several international investors, according to the statement from CatalunyaCaixa. Up to 12 funds participated in the initial phase of the tender. After submitting non-binding offers, 5 consortiums were selected for the binding phase.

Finally, 4 of these consortiums submitted their bids on July 10. Blackstone was one of four funds that had remained until the end of the acquisition process of this loan package. The other 3 candidates were Cerberus, Goldman Sachs, and Lone Star and Oaktree.

The procedure ended with the opening of a second binding phase with the participation of 2 investors, which allowed the “maximizing” of the sale price and ensured that the auction took place under conditions of maximum transparency and competition.

The transaction was structured through the creation of an asset securitisation fund (FTA), which will be registered with the Spanish Stock Exchange and Securities Authority CNMV and will collect the loans transferred by CX. The investor will acquire a majority share in the FTA, and will keep the entire senior bond fund. For its part, the FROB will subscribe to junior or subordinated bonds.

Senior bonds are the first to receive the cash flows so that the investor should reach a certain profitability. From this point, the flow of funds allocated to bonds owned by the FROB can thus benefit from a boost in the asset value performance of the FTA.

The FROB emphasises that the operation will propel the privatisation of the company

According to the FROB, the operation was the result of a competitive process, in which there have been several international investors. The sale of this portfolio has increased “attractiveness” of CatalunyaCaixa, and has allowed it to obtain the maximum value for these assets, leaving the savings bank in a “healthier and stronger” position ahead of its expected privatisation.

This sale successfully concludes first phase of disinvestment in CX, launched in March 2014. According FROB, the quality of the deal "shows the increasing interest in the Spanish financial sector, after the major reorganization undertaken in 2012 and 2013, and the growing confidence in the Spanish economy.”

In early June, CX completed the sale of its estate investment platform to the Blackstone Real Estate fund for as much as 40 billion euros. The operation included a volume of loans and real estate assets worth 9 billion euros, owned by CatalunyaCaixa and Sareb, Spain's public 'bad bank' managing toxic assets. The sale in June also agreed to maintain the 151 employees on the real estate platform, which became separated from the bank and was integrated into the investment company.