Baker McKenzie Madrid has advised Spanish Bank Restructuring Fund (FROB) and CatalunyaBanc (a Spanish bailed-out institution) on its EUR4.18 billion sale of a loan portfolio consisting mostly of residential mortgages. This deal constitutes the largest sale of a mortgage loan portfolio ever in Europe and the largest real estate transaction in Spain since the financial crises.
The sales process, known as "Project Hercules" and organized as an auction, started in April 2014 and was completed on 17 July with the award of the portfolio to Blackstone.
The transaction has been structured as a sale of the portfolio to a Spanish asset securitization fund (FTA) for a purchase price of EUR4.18 billion, equal to the portfolio's book value. Blackstone will contribute EUR3.6 billion to acquire a controlling stake over the FTA and the portfolio by subscribing senior bonds, while FROB will contribute the difference (EUR0.5 billion) to purchase junior bonds, which will entitle FROB to share the free cash flows of the FTA upon Blackstone having received an agreed preferential return.
The competitiveness of the sale process and the efficiency of the transaction structure allowed CatalunyaBanc and FROB to obtain a higher price than initially expected, and will significantly reduce the state financial support needed to complete the process. In turn, the successful divestment of this portfolio will facilitate the privatization of CatalunyaBanc, on which Baker & McKenzie Madrid is also advising FROB, and which is expected to conclude by July 2014.
Baker & McKenzie Madrid-based M&A partner Enrique Carretero led the transaction. The team also included partners Rossanna D'Onza and Rafael Bazan (Banking & Finance), Rodrigo Ogea (Tax), Fernando Diaz (M&A), and Maria Gracia Rubio (Financial Services) and their respective teams.
Baker & McKenzie advised on the legal and tax structuring of the deal and also on the drafting and negotiation of the Investment Agreement and all related transaction documents. N+1 acted as financial advisor to FROB and CatalunyaBanc.
