A consortium of Blackstone, HIG Bayside Capital and AnaCap Financial Partners is among the first round bidders for Project Neptune, a circa €2.7 billion non-performing loan (NPLs) portfolio and servicing operation based in Romania.
PERE’s sister site, Private Debt Investor (PDI), has reported how other bidders include a consortium comprised of The Baupost Group, Deutsche Bank and Sankaty, while Lone Star and Apollo Global Management are also understood to have made separate bids.
Banca Comerciala Romania, a subsidiary of Austrian regional banking group Erste, is selling the platform and received the bids. Jonathan Daniel, director at advisory firm Deloitte, told PDI: “The platform comes with people and operations which creates a strategic interest for investors, giving them the opportunity to buy other NPL portfolios which undoubtedly will come to market during 2015 and 2016. Those assets can then be bolted on fairly quickly and transitioned across. It also helps investors understand recovery levels and future pricing,” The deal is due to complete in the third quarter, PDI understands. The distressed loan book includes a mixture of assets comprised of unsecured consumer loans, residential and commercial real estate.
A spokeswoman for The Erste Group declined to comment on the sale but said that the bank had sold Romanian NPLs last year and was committed to continuing with that process, earmarking the disposal of at least €500 million during 2015. The average coverage ratio for assets in Romania are above 82 percent, she added.
Interest from foreign investors in Central and Eastern Europe (CEE) NPLs has increased as deleveraging by banks in the UK and Ireland slows down and Romania, Hungary and Slovenia are seen as hot markets.
Just last week it was reported how JP Morgan, Lone Star and Oaktree Capital Management will purchase loan books from Commerzbank totalling roughly €3.1 billion, backed by commercial real estate in Central and Eastern Europe. The deals are expected to close by the end of June. The pan-European loan book is comprised of mainly performing loans secured by commercial real estate in countries such as Hungary, Romania, Turkey and the Nordic countries
Oaktree Capital has also been selected by Commerzbank as preferred bidder on a €752 million par value non-performing loan book backed by German assets
AnaCap, HIG Bayside and Deutsche Bank together acquired a €495 million portfolio of Romanian loans in July 2014. The market, at an estimated €60 billion, is relatively small in terms of volume compared to Western Europe, however, versus roughly €70 billion in Ireland alone. Spread across 18 countries, the CEE market is also quite fragmented.
“Whilst Spain is still active, prices are tightening quite considerably, and the perception is you can get better returns in Eastern Europe,” Daniel said. Reflecting a more competitive market in Eastern Europe also, “investors are seeking internal rates of return in the high teens to 20 percent. That is a tightening from 20 to 25 percent in December last year”, Deloitte’s Daniel added.
Deloitte advised on the sale of the €200 million Project Henri, a portfolio of unsecured consumer loans in Romania and Poland, which closed in May this year. Warsaw Stock Exchange-listed debt collection company Kruk acquired the portfolio. Other transactions in the market at present include a loan book from Hungary and further deals from Slovenia are expected to come to market in the third quarter. Lone Star and JP Morgan were selected as preferred bidder on a €2.4 billion portfolio of pan-European loans last week. “The pipeline is very encouraging – maybe €2 billion of NPLs was brought to market in the last year. It’s going to be around €4 to €5 billion in 2015 and north of that in 2016,” Daniel said.