Deutsche Bank pays €28m for Erste Group’s Project Saturn while BoC deliberates whether to trade Project Ariadne to Sankaty Advisors

Deutsche Bank will pay around €28m for a portfolio of 410 defaulted Romanian corporate real estate loans owned by a subsidiary of Erste Group, reflecting seven cents in the euro for troubled loan portfolio, dubbed Project Saturn.

Handelsraum Deutsche BankErste Group is expected to close the sale of the Project Saturn non-performing loan (NPL) portfolio, which had an unpaid loan balance of €433m, by the end of January. 

The Project Saturn’s loans are derived from Erste Group subsidiary, Banca Comercială Română (BCR), the largest bank in Romania.

Separately, Sankaty Advisors has emerged as the highest bidder for Project Ariadne, a three-tranche loan portfolio with an aggregate book value of €545m, put up for sale last August by Bank of Cyprus through sell-side adviser, HSBC.

CoStar News understands that Sankaty’s bid, in partnership with European Bank for Reconstruction and Development (EBRD), bid around 20 cents in the euro – implying a €109m price.  Underbidders were Deutsche Bank and The Baupost Group, who bid together, as well as HIG Bayside and AnaCap Financial Partners.

However, subsequent to Sankaty’s seemingly winning bid, Bank of Cyprus is understood to believe that the bid-ask spread – the difference between the price offers and sale price the vendor is seeking – is too wide, CoStar News understands.  This is thought to be in relation to where Bank of Cyprus had provisioned.

As a result, the sale of Project Ariadne – for now at least – appears to be on hold.  If the trade is not executed, market professionals suggest it could impact international investor appetite for future loan or hard asset portfolio sales from Romania and the wider Central European region. 

Investors, typically private equity funds, hedge funds and proprietary trading desks of investment banks, incur sometimes considerable costs in asset, legal and borrower due diligence when participating in blind bidding auctions, known as dead deal costs.

Instances, such as this, where a vendor may choose to not trade to the winning bidder even when there was no prior stated minimum bid could give investors cold feet next time around.

Last autumn, Volksbank attempted sale of the €460m Project Donau NPL collapsed, due to complexity arising from the multi-jurisdictional nature of the loan pool, as well as the removal of the portfolios two underlying prized assets, a shopping centre and grade A office, both of which were in Romania.  An earlier report on Project Donua can be viewed here.

Meanwhile, Deutsche Bank is in the process of securing a local partner to work out the Project Saturn loan portfolio, which is comprised of f 410 non-performing corporate loans to 91 borrowers.

More than four-fifths (83% or €359.4m) of Project Saturn, by unpaid loan balance, is secured by real estate – comprised of 68%, or €244.4m, in commercial real estate and a further 29%, or €104.2m, in land.  The balance is in movables (equipment and stocks) and pledges.

Last July, Deutsche Bank won Volksbank’s maiden Romanian NPL, a highly granular portfolio comprised of 3,566 loans and backed by a mix of primarily residential, commercial real estate and development land.

CoStar News understands that this portfolio has proved challenging to work through, with the recovery in property fundamentals yet to take hold and as such, market liquidity still lacking.

Deutsche Bank’s Project Saturn is comprised of: a €360m Romanian NPL tranche with 382 loans from 131 different borrowers; a €116m performing tranche of 163 loans from 261 different borrowers; and a wholly-owned 16-strong direct property portfolio, valued at €69m, post enforcement.

For CoStar News detailed report last September on both Project Saturn and Project Ariadne, please click here.

All parties declined to comment.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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