Erste Group pulls sale of €3.6bn Project Neptune NPL platform

Banca Comerciala Romana (BCR), Romania’s largest bank and part of the Erste Group, pulled the sale of the Project Neptune Romanian commercial real estate (CRE) and corporate non-performing loan portfolio (NPL) and platform this week after rejecting the final remaining bidder’s offer.

Erste Group logoCoStar News understands that final bids were submitted in August by a consortium comprised of Blackstone, HIG Bayside and AnaCap Financial Partners. Separately, Lone Star bid.

Initially, Erste Group accepted Lone Star’s offer, but this deal fell through with the bank deciding to pull the deal entirely rather than accept Blackstone’s remaining offer, CoStar News believes.

A consortium comprised of Deutsche Bank, the Baupost Group and Sankaty Advisors previously pulled out of the final stage in July, while Apollo Global Management pulled out at an earlier stage. CoStar News reported on the initial three-story shortlist three months ago.

The proposed Project Neptune transaction comprised €2.7bn in unpaid loans, rising to €3.55bn after unpaid accrued interest payments, penalties and swap liabilities, as well as BCR’s restructuring unit with around 350 full time employees.

Pricing was throught to be below 18 cents in the euro, which implies a price of below €640m. The deal was always expected to be cash only, with no banks prepared to finance the underlying loan pool.

The deal was seen by some as also being overly complex, with considerable conditionality around the sale as well as the challenging the legal circumstances surrounding certain borrowers.

Project Neptune would have been the largest-ever Romanian NPL trade and would have reflected a relatively large position in the country’s NPL market.

While it is too early for any decision, it is thought possible that Erste Group may come back to the market with a smaller, simplified NPL trade.

Bloomberg first reported the deal’s collapse yesterday. A spokesperson for Erste Group declined to comment on the deal. All other parties also declined to comment.

Blackstone’s consortium had recruited EOS, a specialist debt collection agency in Romania, while Lone Star is understood to have partnered with Alvarez & Marsal, the corporate turnaround advisory firm.

Project Neptune was 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.

PwC was sell-side adviser to Ertse Group for Project Neptune after successfully selling the bank’s €433m Project Saturn NPL for around €28m to Deutsche Bank in January.

About CoStar News

Finance Editor, CoStar News
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