Helaba ponders whether to progress sale or withdrawal of Project Aurora NPL

Helaba is expected to make a decision this week on whether to pursue the sale of the circa €450m Project Aurora non-performing loan portfolio after the second round pricing came in significantly below the bank’s expectations, CoStar News understands.

helaba logoProject Aurora consists of a loan pool of around 30 borrower connections including a concentration of assets secured by a minority loan stake in the club bank deal to refinance Eurocastle’s Drive portfolio.

CoStar News understands that Starwood Capital, Lone Star and Cerberus are understood to have submitted second round bids last week which all came in below first round pricing offers, with is now prompting Helaba to reconsider selling the NPL. 

Oaktree was also understood to have bid, but is no longer believed to be in contention.

Initially, Helaba is understood to have provided limited information in the data room on the underlying properties, which resulted in non-binding bids based on a series of assumptions by bidders.

Upon the release of more information by Helaba for the second round process  – including specific details on the addresses of underlying assets secured by the loan pool – bidders were able to price the NPL more accurately, which resulted in lower offers across the board.

After the second round, pricing is thought to have come in significantly below €300m, which reflects a considerable spread on first round indicative offers.  

Helaba is now thought to be deliberating whether to progress with the current final three, start the process again or scrap the NPL sale process entirely.  

CoStar News understands that around 130 of Project Aurora’s circa 160 assets is in Helaba’s stake in the Drive portfolio, owned by Eurocastle.

Eurocastle, a Fortress-managed closed ended fund, acquired the original 303-strong portfolio of Dresdner bank branches in a €1.96bn sale-and-leaseback in December 2005, financed with a €1.53bn mix of senior and junior debt.

Approximately €420m of the original €841m senior debt was spun into the Deutsche Bank DECO 9 – Pan Europe 3 p.l.c CMBS. 

Helaba, the joint arranger and joint lead manager of the €1.15bn DECO 9 CMBS transaction, was subsequently part of the syndicate of lenders which refinanced the entire debt stack secured against the Drive portfolio in 2012 and, most recently, in April.    

The refinancing came with strict amortisation targets, met through piecemeal asset disposals. The remaining Drive portfolio has around 130 assets, valued at €418.8m, and an outstanding combined junior and senior debt of €388.7m, at the end of 2014, reflecting an LTV of 92.8%.

The vacancy rate across the Drive portfolio was 52.8% at the end of 2014.

Project Aurora includes a stake in the outstanding €308.5m junior debt and the €80.3m senior debt, as at the end of 2014, which both mature in January 2016.

Since which, Eurocastle had an additional €70m amortisation target to meet in January this year – which was not met due to delays in the asset sale process – as well as an upcoming €35m target to meet next month.

This year, Eurocastle has reported the sale of two properties and that it has entered into binding agreements to sell a further eight properties for estimated total sale proceeds of €96.2m.

All parties declined to comment.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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