EUROPE NEWS: Swiss watch

Cash-rich buyers of “bad bank” assets have been moaning about the lack of deals in Europe, but they may not be able to do so for much longer.

PERE has learned that, just before Christmas, Zurich-based UBS invited 20 parties to bid on a package of seven loans with a face value of €425 million. UBS declined to comment, but buyers believe it is the first significant sale by the Swiss bank since reorganising its problematic assets in 2008.

The nonperforming loan portfolio, backed by assets in the UK, the Netherlands, Germany and Finland, sparked intense competition among buyers. Numerous parties came forward, and a shortlist was drawn up before the end of the year, according to sources.
While the portfolio may not be big, it has served to help convince buyers of loan packages of a noticeable uptick in activity recently.

Indeed, Credit Suisse sold a €2.8 billion European portfolio to New York’s Apollo Global Management at the end of 2010.

Also among those with significant portfolios for sale is Royal Bank of Scotland. It has plans to sell one portfolio in the UK and two in Spain. One large buyer of real estate loans suggested to PERE that it knew of even more banks that would be hoisting a for-sale sign on “bad bank” assets this year.

Experienced buyers suggest there are several reasons for the perceived increase in activity. One reason is time. “Banks took small write-downs every quarter for the past two years. What is helping is that the values now are not that far away from the levels they can be traded at,” said one buyer who preferred not to be named.

In addition, various departments of banks are in better financial shape than they were in 2008. This gives the banks more leeway to sell their real estate loans at a loss.

Lastly, any bank selling a large portfolio two years ago easily could have sparked panic if the news had leaked out. Such action might have attracted the attention of the rating agencies, which could have downgraded the bank in question and triggered yet more problems.

At press time, there was no announcement by UBS of a buyer for its portfolio. Assuming one comes soon, it undoubtedly will be taken as a positive sign by those wishing to buy loans from banks.