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Blackstone wins €6.4bn Spanish mortgage pool

Forty-three percent of the loans are non-performing

Blackstone has won the hotly contested bidding for Catalunya Banc’s €6.4 billion Project Hercules portfolio of bad Spanish residential loans.
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The US opportunity fund is paying €3.5 billion for the portfolio, which Catalunya Banc said had already been written down by €2.2 billion to €4.2 billion. To get to €4.2 billion, FROB – the agency set up to restructure Spain’s troubled banks – will contribute €572 million.

According to Spanish press reports FROB agreed to provide public funds to support the deal during the negotiations. It has been structured so that the loans will be held by a “fondo de titulacion de activos” – basically a securitisation vehicle – in which Blackstone will hold the majority interest and all the senior bonds; these will have priority on the cash flows until a specified return hurdle is met. After that, the income will flow to FROB, which will hold all the junior/subordinated bonds.

Most of the 111,000 loans are on residential property and mostly in Catalonia; 43 percent non-performing and 15 percent are sub-performing: in default for less than 90 days. They will be managed by Anticipa Real Estate, the servicing arm of CatalunyaCaixa which Blackstone, in partnership with Magic Real Estate, acquired for €40 million in April.

Ken Caplan, Blackstone’s European head of real estate said: “This acquisition is coherent with our previous investments in Spain. We continue to believe in the recovery of the economy and the residential market. We will work closely with Anticipa Real estate to manage the portfolio to the benefit of all the parties involved.”

According to Catalunya Banc, there was strong international interest in the portfolio, with 12 funds competing in the initial phase including most of the big US opportunity players: Apollo Global Management, PIMCO, Oaktree Capital Management, Cerberus Capital Management, George Soros, and Blackstone. These were whittled down to four binding offers.