Blackstone Wins Spain's Auction for Loan Portfolio

By Dow Jones Business News, 

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

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