Blackstone and Deutsche Bank-fronted consortiums compete with Lone Star on €3.6bn Project Neptune

Banca Comerciala Romana (BCR), Romania’s largest bank and part of the Erste Group, has selected two consortiums and one solo private equity investor to progress to the second round the largest-ever Romanian commercial real estate and corporate non-performing loan portfolio.

Erste Group logoThe CRE and corporate NPL, dubbed Project Neptune, has unpaid loan balance of €2.7bn but gross liabilities, including unpaid accrued interest payments, penalties and swap liabilities, of €3.55bn.

The Project Neptune sale also includes BCR’s restructuring unit with 350 full time employees.

Deutsche Bank and The Baupost Group are bidding together for the second time, after emerging as the underbidder on the €545m Project Ariadne loan portfolio, the Bank of Cyprus Central and Eastern Europe NPL which ultimately collapsed.

Sankaty Advisors, the highest Project Ariadne bidder, has now teamed up Deutsche Bank and The Baupost Group.

The new consortium reflects a change in preference by Deutsche Bank, in favour of The Baupost Group, after previously acquiring one of the earliest Romanian and CEE NPLs in July 2014, the €495m Volksbank NPL, with AnaCap Financial Partners and HIG Bayside.

As a result, AnaCap Financial Partners and HIG Bayside have partnered with Blackstone. Lone Star is the third shortlisted second round bidder. Apollo Global Management has pulled out.

Project Neptune is comprised of five sub-pools of loans. Based on the gross liabilities total as follows:

  • Large corporates loans: €1.4bn, across circa 250 borrowers, subdivided further by loan type as follows:
    • €900m of loans to large corporates (many of the loans are to companies which own commercial properties but their value is intrinsically linked to the borrowers, some of which are insolvent);
    • €500m of SME loans with commercial real estate collateral security
    • Retail mortgages: €1.15bn spread across 53,500 borrowers.
    • SME loans: €550m of loans from around 1,100 borrowers, with collateral including land and retail commercial property;
    • Real Estate loans: €450m of loans across around 40 borrowers with security including a concentration of multi-family
    • Real Estate Owned (REOs) properties: €50m worth of foreclosed granular loans from more than 100 borrowers.

CoStar News understands that first round indicative bids on €3.55bn Project Neptune NPL came in at between 18 and 20 cents in the euro, which implies a price of between €639m and €710m.

Final pricing is expected trade around 20 cents in the euro, or €710m, providing the winning bidder with a target internal rate of return (IRR) on Project Neptune of 20% plus.

Final binding bids are due at the end of July, with finalists assured that BCR is a committed seller.  

PwC is selling Project Neptune on behalf of Erste Group.  In January, PwC Erste Group’s €433m Project Saturn for around €28m to Deutsche Bank.

All parties declined to comment.

About CoStar News

Finance Editor, CoStar News
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