Five contenders in the race for the bad debt deal of the year in Portugal

LX Partners has put €4.2 billion euros of non-performing loans (NPL) and the servicer Algebra up for sale. It’s the deal of the year in Portugal and there are five interested parties.

The NPL of the year in Portugal has attracted five bidders, according to information obtained by ECO from two market sources.

The consortium formed by Cerberus/Intrum/FS, Balbec, Carval, LCM and Bain has submitted non-binding proposals for the purchase of the €4.2 billion of problematic loans and the Algebra platform, which is also part of the deal.

LX Partners has put its entire NPL business in Portugal up for sale in a process codenamed “Projeto Cascais” and led by KPMG.

At stake are NPL that the fund has purchased from Portuguese banks in recent years. Out of a gross value of €4.2 billion, approximately €4 bilion are unsecured loans and another €200 million are secured loans. The deal also includes the servicer responsible for managing this portfolio, Algebra Capital.

LX Partners is an investor focused on distressed debt and NPLs, private equity and real estate. In Portugal, in addition to the NPL business, it owns Five Credit (a digital platform for alternative loans for SMEs), the management company Circle Capital and invested €125 million in Smart Studios (studios for students) in 2018.

The “Cascais Project” can be considered the biggest of this year, which has been marked by a strong cooling of the market. The few portfolios that have entered the market this year are small in value, rarely exceeding €100 million. One of the largest cases is that of Banco Montepio, which has a portfolio of distressed assets valued at around €230 million, including, among other things, ongoing debt and cash in court.

The main reason for this cooling is the “big clean-up” that the banks have carried out in recent years. Five years ago, the banking system was faced with €31.8 billion of NPLs, equivalent to 13.6% of total loans. By the end of June, the ratio had fallen to 3.1%, below the “magic number” of 5%, totalling €9.7 billion, according to the latest data from the Bank of Portugal. Net of write-downs, NPLs totalled €4.2 billion.

Original story: ECO |Alberto Teixeira
Photo: Hugo Humberto Plácido da Silva on FreeImages
Edition and translation: Prime Yield