Sabadell and Cerberus are in court in a dispute valued at 365 million euros.

Sabadell and Cerberus are facing each other in court with a dispute valued at €365 million . The bank claims the U.S. fund for not paying what, in its opinion, it owes for the purchase five years ago of three portfolios of real estate assets residing in Spain, according to the Financial Times.  

The origin of the conflict goes back to the process carried out by Sabadell to “clean up” the toxic assets that accumulated on the balance sheet after the financial crisis. Like the rest of the banks, the entity packaged the damaged exposure and sought to deconsolidate it by selling it to a third party.

The entity thus agreed in 2018 and, after a competitive process,to sell to Cerberus theportfolios ‘Challenger’, ‘Coliseum’ and ‘Rex’, which had properties of all types for a total gross value close to €6,414 million.

The transaction consideration set at around 3,500 million euros and, as usual in these operations, both partners agreed to defer in time up to 21% of the total amount -some 600 million-, according to sources close to the judicial process.

Some of the properties in the portfolio lacked the relevant registration in the Spanish property registry due to issues such as being in the process of repossession or auction under development. And under the agreement, Sabadell must resolve these registrations to regularize the situation of the properties, with a three-year period until the end of the 2022 financial year.

The bank anticipated the works on the properties in the portfolio ‘Coliseum’and Cerberus paid the deferred payment associated with it – about 170-180 million-. The amount outstanding was thus reduced from around €600 million to around €400 million.

The conflict came with the ‘Challenger’ and ‘Rex’ portfolios. Sabadell complied with the records in a package of real estate valued at €365 million that now demands in court, but the American fund refused to support the payment alleging that it had not been satisfiedon the totality of the assets.

Following Cerberus’ refusal, Sabadell sued the fund in January 2023 in the High Court of Justice in England because the fund’s company guarantor of the agreement formalized in Spain is subject to British law.

The trial was held last week and the magistrate in charge of the case advanced his intention to issue a ruling before Christmas, in the second week of December. The ruling could be final because it is very unusual to file appeals in the United Kingdom and is reserved for very narrow issues.

Original Story: El Economista
Edition and translation: Prime Yield