Spanish state owner lender Bankia has agreed the sale of €3bn of bad loans and repossessed property to private US equity firm Lone Star. The portfolio includes foreclosed real estate assets with a gross book value of approximately €1.65bn, as well as €1.42 bn in non-performing loans (NPL).

Bankia will keep a 20% ownership stake in the company formed to own, manage and sell the foreclosed real estate, while Lone Star will own 100% of the bad loan portfolio.

Spanish lenders have been making a determined effort to clean up their balance sheets since Spain’s decade-long property bubble burst in 2008. Last year, Spain’s banks led Europe with €50.8bn of the continent’s €104.4bn in distressed real estate asset sales, according to the investment bank Evercore. Spain has kept that lead over the first nine months of 2018, with €33.3bn of Europe’s €77.1bn total.

Bankia has had an especially fraught role in the banking crisis that followed the bursting of the property bubble. The lender was formed from the merger of seven regional savings banks in 2010 and held an initial public offering in 2011. But a year later Bankia revealed a vast capital shortfall that required nationalisation and a bailout of more than €20bn.

Now, the Bank stated the sale of the real estate and loan portfolios to Lone Star, combined with other reductions in non-performing loans and foreclosed assets expected for 2018, will reduce non-performing assets it holds by a gross book value of more than €6bn. The lender said the deal is expected to close in the second quarter of 2019 and will increase its fully loaded common equity tier one ratio by 12 basis points.The bank set up the goal to sell €8.8bn in bad loans by 2020.

Original Story: Financial Times | Ian Mount
Photo: Bankia
Edition:Prime Yield