Deutsche Bank, HIG’s Bayside Capital and private equity firm AnaCap Financial Partners have together acquired a €495m non-performing and underperforming loan portfolio backed by Romanian property in one of the first examples of loan buyers moving outside overcrowded European markets.
The portfolio consists of 3,566 non-performing and under-performing loans secured against residential, retail and other commercial real estate and development land.
It was sold by Volksbank Romania, which like many banks in Europe is seeking to restructure and divest non-core or non-performing assets in order to comply with the new capital adequacy regime. It has a separate loan sale underway called Project Donau.
Volksbank Romania is owned by partly-nationalised Austrian lender Volksbanken, although its parent must divest its stake (already written down to zero) in the Romanian bank by the end of next year as a condition of the state support it received during the financial crisis.
The deal is understood to be the largest in Romania to date. The size of the discount was not disclosed.
Private equity firm AnaCap and HIG (typically through its Bayside Capital) have been highly acquisitive in the European NPL market. AnaCap bought a €700m corporate loan portfolio from UniCredit earlier this year, for instance, while Bayside purchased an Italian NPL portfolio from Cassa di Risparmio di Ravenna last month. This latest deal suggests investment groups targeting NPL portfolios are now looking beyond core European markets like Spain and Italy for opportunities on the European periphery.
Bayside Capital’s London-based managing director Ahmed Hamdani (pictured) said: “Romania is one of the places that’s less picked over. The fundamentals are under-writeable.”
Distressed investor Bayside will divide its share of the assets’ servicing between three local servicing firms depending on the nature of their underlying collateral.
Earlier this year, Hamdani told Real Estate Capital the firm “picks [its] spots in geographies where there’s big banking dislocation and a high chance of finding and delivering on the opportunities”.
“Even in Spain the very easy trades are [already] done. Pricing expectations have changed.” Hamdani believes Spain reached the bottom last year.
“A lot of stuff is beginning to happen in Eastern Europe now [where] Austrian banks are over exposed,” he says. “Not everyone is looking at Eastern Europe. We’ll run a bit to beat the rush; a rush will reset the price”.
Justin Sulger, head of AnaCap Credit Opportunities team, said in a statement: “The portfolio is backed by a wide variety of real estate assets, requiring a range of resolution strategies, which necessitate a deep understanding of consumer and corporate debt in local markets and a highly analytical approach to valuation and on-going management.”
Speaking in March when the sale first came to public attention, Volksbank Romania president Benoit Catel said: “This transaction further de-risks the business, and results in a cumulative 93 percent reduction of our real estate non-performing loan portfolio. We continue in parallel to focus on growing the profitable core of our business.”