The assets will be passed with an average discount of 63% and the entities will save up to 6,000 million in capital needs
The real estate assets will be transferred to the ‘bad bank’ with an average discount of 63% over the gross book value, as indicated by the deputy governor of the Bank of Spain and president of the Fund for Orderly Bank Restructuring (FROB), Fernando Restoy, in a press conference, in which it was specified that NCG Banco will pass 6,000 million in loans and 1,200 in foreclosed assets.
By type of assets, the discount will be 79.5% for land, 63.2% for ongoing developments and 54.2% for finished homes.
In the case of loans to developers, the average discount will be 45.6%, including cuts of 32.4% for projects already completed and 53.6% for loans to finance urban land- Devilstrill fast payday loan tallahassee.
The return on capital provided for the project as a whole in a conservative scenario is estimated at around 14-15% over the 15 years, compatible with “modest” results in the first years. “We are talking about transfer prices that are conservative and that will support the profitability of Sareb”, explained Restoy.
It has also indicated that the net effect of the transfer of assets will be “positive” for the transferring entities since it represents a saving in capital needs that could be around 5,000 or 6,000 million euros. “Sareb is going to reduce the bill for the taxpayer,” he said.
He also wanted to make clear that the price at which the assets will be transferred to the Company “is not an appropriate and appropriate reference” for the valuation of those assets of entities that do not need to take their funds to the so-called ‘bad bank’.
The volume of assets to be transferred
The volume of assets to be transferred is estimated at 45,000 million euros, although the amount will increase by close to 15,000 million after the incorporation of the assets of group 2 entities – banks that will require recapitalization with public support – although in no case will exceed 90,000 million euros.
Of those 45,000 million euros, two-thirds correspond to loans and a third is equivalent to foreclosed assets, as detailed by the general director of the FROB, Antonio Carrascosa, who has ensured that the Sareb will have 13,000 million square meters on land. “The land represents 40% of the foreclosed assets,” he said.
Restoy also pointed out that Sareb will have a total of 89,000 finished homes that will come from Group 1 entities. In addition, those obtained from the analysis of group 2 components will be added in the future.
The top executives of the FROB have made it clear that at this moment, Sareb does not incorporate the transfer of more assets than those already indicated, so it is not expected to include retail mortgages and loans to SMEs, for example.
“It is important that Sareb has a structure that can be managed efficiently, problematic assets are what they are and credits or mortgages are far from being considered problematic assets,” said Restoy.
By volume of assets, BFA-Bankia will transfer 20,000 million euros in loans and 4,800 million in assets; CatalunyaBank 6,300 million euros in loans and 3,000 in foreclosed ones; Novagalicia Bank 6,000 in loans and 1,200 million in foreclosed ones; and Banco de Valencia will transfer 2,300 million in loans and about 500 in foreclosed ones, all once the “price cut” has been applied. “In total, they would be about 44,000 million euros,” they said.
To be financed, the company will have senior debt guaranteed by the State that will issue the Sareb as a counterpart for the assets received by the banks and with subordinated debt and ordinary capital subscribed by private investors and by the FROB.
Restoy has indicated that the prices at which the assets will be sold are not established since they will depend on supply and demand and market conditions and added that “the logical thing” is that the sale activity in the first years is “less intense” than it will be in the medium term.
On the form of sale, the general director of the FROB, Antonio Carrascosa, has specified that no initiative can be ruled out, although he has stated that “no offices will be opened on the street to serve retailers.”
“There is no need to prejudge the method of marketing that will be established for society, there will be agreements with the entities that have transferred assets, with real estate development, but the method must not be predetermined,” he added.
The people in charge of the FROB have qualified that today they are in talks with the entities that could become potential shareholders of Sareb but, for the time being, they have only been presented with “the wickers” so that “they will be making their place composition. “And depending on that, I can decide.
Structure of the ‘Bad bank ‘
The so-called ‘bad bank’ will have a board of directors that will have a minimum of 5 members and a maximum of 15 and at least a third of independents; with an independent audit committee and remuneration and appointment committee, and with management, risk, investment, asset and liability committees.
Additionally, it will have a follow-up commission that will be alien to the Sareb structure and that will be composed of the Ministry of Economy, the Treasury, the Bank of Spain and the National Securities Market Commission (CNMV).