After LX Partners, it’s now the Italians at DoValue who are preparing to exit the Portuguese distressed debt market by selling the management company, which has €500 million in assets under management.

More investors are leaving the distressed debt market in Portugal. After LX Partners, whose €4 billion deal will be further developed at the end of the month, it is now the Italian group DoValue, controlled by Fortress and Bain, which is moving ahead with the sale of its non-performing loans (NPL) and property manager in Portugal, with €500 million in assets under management and around 60 employees, according to information gathered by ECO.

The process of selling DoValue Portugal, which the company confirmed to ECO is underway, is being managed by PWC Spain, according to the same sources.

According to DoValue Portugal, “the sale process is progressing positively and already has the interest of more than a dozen potential buyers”.

One of the reasons for the high level of interest, according to the company, has to do with the restructuring, that began in the first quarter of 2023, to “transform the company into a boutique servicer, focused on various strategic services for the regularisation and management of complex assets”. “In this context, we have been attracting new clients, also with a strategic role, thus accumulating a broad and relevant experience for this specialisation,” DoValue Portugal told ECO.

DoValue Portugal’s business has declined in recent years, with sales falling from €21 million in 2019 to 7.1 million in 2022, according to the InformaDB company database. It closed 2022 with losses of almost €3 million. Until September this year, sales totalled €3.8 million, the company told ECO.

The Italians entered the Portuguese market in 2019 with the acquisition of Altamira Portugal, which two years earlier had bought the business unit responsible for managing Oitante’s real estate assets and credit portfolio – the vehicle created to hold the assets of the former Banif that Santander didn’t want to buy.

At the time, Altamira also took over the management of a batch of Oitante’s real estate assets and NPL  totalling €1.5 billion, a portfolio that now has a higher residual value.

In addition to the agreement with Oitante, DoValue Portugal also manages a portfolio of non-performing loans for Davidson Kempner.

Listed on the Milan stock exchange, DoValue claims to be the largest servicer in Southern Europe. The group is controlled by Fortress and Bain, which own more than 40 per cent of the company. Both funds have other investments in Portugal. For example, Fortress is preparing to acquire a €230 million NPL  portfolio from Banco Montepio, ECO announced at the end of last year.

Edition and translation: Prime Yield
Source: ECO | Alberto Teixeira
Photo: Shutterstock Photo

DBRS talks of a prolonged period of inflation and high mortgage rates that could put pressure on the system, especially given the vast majority of variable rate mortgages in the Portuguese economy.

DBRS Morningstar classifies the Collateral Performance Outlook for 2024 (the real guarantees attached to defaulted loans) in Portugal as “Stable”. The 2024 Credit Rating Outlook is also classified as “Stable”.

Similarly, the Portuguese Non-Performing Loans (NPL) securitisations rated by DBRS performed well, with all the notes rated by the agency (relating to four operations) having been repaid in full.

DBRS points to potential risks in future transactions. These include the slowdown in residential property prices in Portugal following the rise in interest rates. Property prices still increased by 8.7% in the 2nd quarter of 2023 compared to the previous year, compared to 13.2%  in the 2nd quarter of 2022, it points out.

DBRS speaks of a prolonged period of inflation and high mortgage rates that could put the system under pressure, especially given the vast majority of variable rate mortgages in the Portuguese economy.

Vulnerabilities are becoming visible, with new measures introduced in September 2023 to support households facing greater financial pressure, says DBRS.

“As emphasised in our commentary on foreclosures and bankruptcies, longer legal deadlines and the backlog of foreclosure and bankruptcy proceedings could affect performance and place increased importance on the manager’s ability to achieve out-of-court solutions,” the analysis reads.

Regarding the European NPL securitisation market, DBRS says that “in terms of credit performance, the situation last year leaned more towards the negative, but still without any obvious general trend”.

“Most of the well-performing transactions, such as Irish, Portuguese, more recently Italian and UK, have continued to deleverage, with a healthy level of loan recoveries and note repayments; however, older Italian and Spanish NPL securitisations continue to struggle to reverse their past performance,” says DBRS in its European NPLs 2024 Outlook.

The European NPL market slowed down significantly in 2023, says DBRS, which adds that none of the transactions suspended after the European Central Bank began raising interest rates resumed during the year.

“With the exception of some concentrated issuance in the final weeks of the year, activity in this asset class was the quietest since issuance resumed in 2016 following the Great Financial Crisis,” says DBRS.

The analysis focuses on Asset-backed Commercial Paper, Residential Mortgage-Backed Security, and Auto.

NPL securitisations outside government asset protection programmes, seen in jurisdictions such as Cyprus, Ireland, Portugal, Spain and the UK, depend on European securitisation market conditions. Here DBRS Morningstar expects “public issuance of senior notes during 2024 to be broadly in line with what we saw during the post-pandemic, pre-Ukraine invasion period (2021-2022) at 200 to 400 million euros per year, given that interest rates are now stabilising”.

As in 2023, the year could also see securitisations of smaller NPL portfolios, re-performing loan portfolios (which have returned to performing status after ceasing to be so) that can be sold from existing securitisations and other more esoteric mixed asset class transactions involving NPL and loans with a low probability of repayment.

For 2024, the rating agency expects the rating outlook to remain stable in all jurisdictions covered by the analysis, “with stable credit outlooks for most of them”.

“We maintain our negative credit outlook for Spain and Italy – the two jurisdictions where we have seen difficulties in some of the transactions assessed over the past few years, including in the face of prospects for delayed recovery and, in some cases, a downwardly revised total recovery amount.”

“An important factor to consider for the European NPL space in 2024 will be the recent renewal of Greece’s Hellenic Asset Protection Scheme (HAPS), which was approved on 4 December 2023 with a total guaranteed amount of €2bn of securitised bonds and a new expiry date of 31 December 2024 (unless extended by subsequent decree). We believe that many of the Greek banks – both systemic (Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank) and other non-systemic banks – will take advantage of this renewal and securitise some or all of their NPL stocks before the guarantee expires,” says DBRS.

Edition and translation: Prime Yield
Original Story: Jornal Económico | Maria Teixeira Alves
Photo: Bigstock Photo