Commerzbank confirms closure of Project Octopus trades to JPMorgan and Lone Star

Commerzbank has this lunchtime confirmed the closure of the sale of the former Eurohypo Spanish commercial property lending business, known as Project Octopus, with €4.4bn in combined Spanish and Portuguese loans trading in separate tranches to JPMorgan and Lone Star.

Commerzbank logoLone Star’s circa €1.5bn acquisition of the non-performing loan component of Project Octopus has been financed by JPMorgan.

In a press statement this lunchtime, Commerzbank confirmed the Spanish commercial real-estate financing portfolio and the portfolio of non-performing loans in Portugal have been sold as well as the entire operational CRE activities in Spain and the transfer of employees to an affiliate of Lone Star.

Commerzbank confirmed that the €4.4bn is comprised of €1.4bn in non-performing loans – of which Spain reflected €1.1bn and Portugal, €0.3bn.

Underbidders included Blackstone and Deutsche Bank, Apollo and Santander, and a joint venture bid by Cerberus, Goldman Sachs and Orion Capital Managers.

CoStar News reported on JPMorgan and Lone Star’s win three weeks ago, which can be seen here.

The transactions reduce Commerzbank’s CRE loan book by 16% to €32bn and the non-performing loans nearly by one-third to €5.1bn, both as at the end of March.

Separately, Commerzbank has sold €0.7bn of Japanese commercial real estate loans within subsidiary, Commerz Japan Real Estate Finance Corporation, to PAG’s Secured Capital REP V, the Asian alternative investment manager, and Pacific Alliance Special Situations funds. The portfolio will be managed by PAG’s Tokyo-based Secured Capital Investment Management.

Commerzbank said the negative impact from sales on earnings in the segment non-core assets in the second quarter of 2014 amounts to approximately €100m. However, the reduction of €3.2bn in risk-weighted assets (RWA) means the transactions will lead to a total positive net capital effect of approximately €200m, Commerzbank stated.

“Overall the sales have a positive effect on the core capital position of Commerzbank,” Commerzbank wrote in the statement. “Also the reduction targets will be positively influenced by these transactions.”

“These transactions are further evidence that we remain committed to our value-preserving run-down strategy. In Spain we were able to take full advantage of the excellent market opportunity, thereby reducing significantly the earnings impact through an auction process,” said Sascha Klaus, divisional board member non-core assets commercial real estate, in a prepared statement.

 “With the sale in Japan we have disposed of our only CRE portfolio composed of subordinated loans. At the same time we have further reduced complexity, as this was our last remaining CRE operation outside Europe.”

About CoStar News

Finance Editor, CoStar News
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