Two non-performing corporate loan portfolios, secured by Romanian commercial real estate, have been launched with a combined face value of just under €1bn from Bank of Cyprus (BoC) and Erste Group.
The first non-performing loan (NPL) portfolio is dubbed Project Ariadne, a three-tranche portfolio with an aggregate book value of €545m, which is being sold by Bank of Cyprus. HSBC has been mandated to sell the portfolio.
Project Ariadne is comprised of:
- A gross €360m Romanian NPL comprised of 382 loans from 131 different borrowers. Against which are two different valuations of the underlying collateral; €222m and €339m, implying an LTV of either 162% or 106%. Within the NPL portfolio, 27 clients own 93 loans, with a €295m book value reflecting 82% of the subpool.
- A gross €116m performing loan book comprised of 163 loans from 261 different borrowers. Against which are two different valuations: €63m and €102m, implying an LTV of either 184% or 114%. One client group alone accounts for eight loans, reflecting €93m of subpool book value and 80% of the total performing tranche. However, a stricter definition could see this connection, secured by mainly liquid shares in a listed Romanian financial institution, classified as an NPL.
- A wholly-owned 16-strong direct property portfolio, valued at €69m, post enforcement. The portfolio includes a €27.4m shopping centre and €15.7m residential compound in Bucharest, a €9.0m hotel in Prahova as well as a mix of urban and rural land, predominantly in Bucharest.
The portfolios are managed and serviced by a team with knowledge of the clients and the local market, part of which can be transferred with the portfolio. The acquiring entity could take ownership of existing licences that will enable it to manage, write or acquire leasing loans.
As part of the Project Ariadne sale, BoC is offering the transfer of 46 employees, IT infrastructure and other material contracts from its Romanian operations which carry an annual cost of €325k.
Last week, BoC confirmed the disposal of Project Avenue, a £289m UK residential and commercial loan portfolio to Mars Capital Finance, which is partly owned by Oaktree Capital Management.
In Romania, BoC’s wider deleveraging is part of the bank’s strategy to dispose of its non-core operations to strengthening its capital and liquidity positions.
In April, BoC sold its 9.99% stake in Romanian Banca Transilvania followed up by the sale of JW Marriott Bucharest Grand Hotel in August for €95m Strabag SE.
Separately, the Banca Comercială Română (BCR), the largest bank in Romania which is wholly owned by Erste Group, is selling the €433m Project Saturn NPL, a Romanian secured Large Corporate non-performing loan portfolio.
PricewaterhouseCoopers has been appointed to sell Project Saturn, a portfolio of 410 non-performing corporate loans to 91 borrowers, secured by collateral comprising real estate, movables (equipment and stocks) and pledges.
First round expressions of interest have already been lodged.
Borrowers by industry vary from manufacturing and production, real estate developers, construction companies, to animal faming and mining and metals.
Project Saturn’s collateral is 83%, or €359.4m, secured by real estate, of which 68%, or €244.4m, is in commercial real estate and a further 29%, or €104.2m, is land.
The location of the collateral is dispersed around Romania, while 64% of the portfolio’s exposure is denominated in euro while a further 31% is in Romanian Lei.
Average loan balance is €5m, while the median days past due (DPDs) is 1,200. 87% of Project Saturn’s exposures are in insolvency.
Prior to the summer Volksbank, the Austrian bank, brought two Romanian-dominant non-performing corporate loan portfolios, the first – with a €495 million gross balance – sold at the end of July to a consortium comprised of Deutsche Bank, AnaCap Financial Partners, H.I.G Capital International Advisers and APS Holding.
The NPL, comprised of 3,566 loans and secured by a mix of primarily residential, commercial real estate and development land, was the first of its kind on the Romanian market.
The second, the €460m Project Donua, is still amid a protected sales process, slowed by the incomplete data room available.
Like with the unnamed first Volksbank NPL, the winners of projects Ariadne, Saturn and Donua, are expected to be consortiums, including loan servicers with local knowledge and experience as well as local real estate specialists.
While the Eastern European markets clearly presents challenges to investors, due to their highly imperfect, inefficient and undeveloped legal framework for creditors to enforce over defaulted loans, Romania is considered to make made some progress towards being more Western capital-friendly.
In Romania, over last 18 months, positive macro news flow – driven by the positive performance of the Romanian stock market and the levels at which sovereign debt is trading – has starting to feed into a re-rating of the risk premium for the country.
Romania’s economy is showing signs of recovery. Real GDP growth is up from 0.7% in 2012 to 3.5% in 201, with forecast of 3% annual growth over the 2014 to 2016 period.
Bucharest’s real estate market has an average yield profile of 8.3% for both office and retail, while the residential and non-residential real estate sectors have seen an increase in construction activity and investment appetite.
All parties declined to comment.