MADRID-- Blackstone Group LP solidified its growing investment
presence in Spain, winning an auction Wednesday for around EUR6.5
billion ($8.84 billion) of Spanish mortgages, according to a person
with direct knowledge of the deal.
The mortgages were issued by Catalunya Banc SA, a prominent
lender in the Catalonia region that the Spanish government
nationalized in 2011 as growing loan losses threatened to sink the
bank. Spain has spent EUR12 billion in European bailout funds to
clean up the Barcelona-based lender.
Spain's bank bailout fund is selling the loan portfolio and
Catalunya Banc itself as part of a bid to return the lender to
private hands. Binding offers for the bank are due Friday. Two
previous attempts to sell the bank have failed.
On the mortgage portfolio, Blackstone beat competitors that
included Oaktree Capital Group, Goldman Sachs Group Inc., Lone Star
Funds and Apollo Global Management LLC.
Investors' binding offers for the loan portfolio, known as
Project Hercules, were submitted by Friday. Blackstone and Oaktree
submitted bids that topped EUR3.5 billion, people familiar with the
deal said, and moved on to the next round.
The offers by Blackstone and Oaktree were close enough that they
had to submit new bids on Tuesday, people familiar with the process
said.
TPG Capital Management had teamed up with Blackstone during the
auction process but dropped out, these people said.
The final price paid by Blackstone isn't clear.
Around EUR2.6 billion worth of the loans in the Hercules
portfolio are performing, meaning borrowers are up-to-date on their
payments; 1.1 billion are "subperforming," or up to 90 days
overdue, and EUR2.7 billion are nonperforming, or more than 90 days
overdue, according to a person familiar with the deal.
The high percentage of bad loans means that bidders were betting
that Spain's recovery from a deep recession that began a year ago
will continue. In a growing economy, more homeowners would be able
to repay their mortgages, or investors could foreclose on the
properties, for instance, and be able to rent out the homes or sell
them for a profit.
Spain's government forecasts 1.2% growth of its gross domestic
product this year.
Blackstone has stepped up its presence in Spain in recent
months.
In July, the firm bought 1,860 rental apartments from the city
of Madrid for EUR125.5 million. In April, Blackstone bought
Catalunya Banc's real-estate servicing unit, which manages the
lender's real-estate portfolio.
CatalunyaCaixa Inmobiliaria, as it is called, said in a recent
news release that it sold 6,000 properties worth EUR680 million in
2013.
Oaktree was one of several bidders in December for bailed-out
lender NCG Banco SA, the largest bank in the northwestern Spanish
region of Galicia. That auction was won by a Venezuelan lender.
Write to Jeannette Neumann at jeannette.neumann@wsj.com
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