Santander took on A result of the Spanish Banco Popular failure is that the bank is to seek partners for the purchase of toxic loans and assets. The bank owns a number of repossessed real estate and real estate loans that it wants to convert to cash in the wake of its takeover in May by Santander. Banco Popular was due to collapse when European authorities decided to take action to prevent this. Santander purchased the bank for just one euro.
The total gross value of these so-called ‘assets’ is in the region of €30 billion ($34.27 billion) – a large sum for real estate and loans that are very risky investments. Banco Popular new chairman, Rodrigo Echenique, gave a statement to the effect that the bank was seeking partners for these assets.
Banco Popular’s property management unit is known as Aliseda Real Estate. In 2014, it sold a majority share of this unit to American companies. These were real estate investment company Kennedy Wilson and Varde Partners hedge fund of Minneapolis. Popular has stated its intention of purchasing back 51% of Aliseda Real Estate by the third quarter of this year. The price agreed for this purchase is €180 million. This would involve a capital consumption for Banco Popular of €302 million.
Santander aims to reduce the volume of toxic assets held by Banco Popular by 50% within 18 months, and totally in 3 years. These assets were largely a cause of the Banco Popular failure. Santander took on Morgan Stanley to advise Popular in achieving this. Popular has now reportedly restored normal operations in branches of the bank.
However, the bank’s troubles are not all under control. Litigation options are being explored by those bond investors who lost out after the Banco Popular failure, with law firm Quinn Emanuel acting for them. Some investors are questioning Popular’s actions in failing to seek capital earlier.
They will raise the question of an offer made by a consortium led by Deutsche Bank. This consortium offered to underwrite a rights issue of €4 billion. This offer was made prior to regulators becoming involved in the Banco Popular failure. Banco Popular may believe it is on the right financial path again. However, it has many obstacles to overcome before it is anywhere near secure.
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