Loan sales continue to be big news in the UK and Ireland of late, with the announcement yesterday that Ulster Bank has completed the sale of Project Finn – another £1.3bn of property loans now officially off their books. However, these loan sales are not unique to the island of Ireland. All across Europe, loan sales are part of a wider European trend involving major banks and private equity firms from across the pond, and it looks like this trend is set to continue for the foreseeable future.
Throughout Europe, performing and non-performing loan portfolios are being sold by asset management agencies (AMAs) set up by European governments to liquidate the ‘bad’ assets of national banks. Entities such as Ireland's infamous NAMA and the UK's Asset Resolution Limited (UKAR) are only two of the AMAs involved. The largest ten such organizations in Europe represent a combined non-core real estate exposure of some €233bn, so there are a lot of loans potentially up for sale to private equity firms and other investors.
The portfolios of the biggest ten bad banks comprise commercial real estate loans, residential mortgages and other forms of real estate. NAMA (Ireland), SAREB (Spain) and UKAR (UK) hold 91% of the €233bn figure, so they will continue to be large players in the sale of loan portfolios over the next few years.
With sales of this nature taking place in Europe, the next countries to be targeted by AMAs are likely to be Italy, Romania, and Poland. Further afield, China has established four bad banks, potentially creating more opportunities for investors to purchase bad assets globally.
The UK and Ireland are the top two countries for the number of closed loan sales deals in Europe, with a combined 49% of the total number of closed European loan sales. The UK has closed more sales than any other single country (7,278 or 31% of deals closed in Europe), with Ireland in second place with 4,144 deals (18%).
These insights underscore the fact that a large number of borrowers with UK and Irish banks and building societies have seen their loans sold to private equity firms. This is where the opportunity for borrowers commences. It's important that borrowers very quickly educate themselves around this process and it is essential for them to be in a position to secure new capital partners if they want to continue their involvement with their property portfolio. With local banks reluctant to lend, borrowers will need to look elsewhere for funding.
GDP Capital is one such platform set up to help borrowers refinance away from private equity. Over the last eighteen months we have been working hard to form relationships with capital partners both in the UK and USA, who are willing to get involved in this space.
In 2015 we have been successful in a number of situations in this regard and in terms of our own business we anticipate a very active thirty six months facilitating people who need new finance partners.
For more information in relation to this, please get in touch with our office.
For a general overview of what loan sales mean for borrowers, see Understanding Loan Sales.