Blackstone Group LP is seeking to restructure some of the 6.4 billion euros ($7.2 billion) of Spanish home loans it bought at a discount to help borrowers meet repayments, according to three people with knowledge of the matter.
The world’s largest private equity firm is offering to cut outstanding debt or allow homeowners to hand back the keys and walk away from loans, said two of the people, who asked not to be identified because the matter is private. Blackstone holds the mortgages of 40,000 homeowners in Spain after buying the debt for 3.6 billion euros from struggling savings bank CatalunyaCaixa.
Blackstone can avoid the time and expense of repossessing homes by helping borrowers find ways to continue paying their mortgages, something that’s more difficult for Spanish banks because of provisioning requirements and central bank regulations. Avoiding evictions may also mute political claims that private investors are coming to Spain to take people’s homes away.
“If you are struggling to pay your mortgage, you are undoubtedly better off having Blackstone as your creditor than a traditional Spanish bank,” said Juan Villen, head of mortgage services at property website Idealista.com. “Blackstone can be much more flexible.”
Andrew Dowler, a London-based spokesman for Blackstone, declined to comment when called by Bloomberg News.
Loan Portfolio
The subject of Spaniards losing their homes is a hot-button political issue, with power in the Madrid and Barcelona town halls swinging to parties that pledged to ban evictions during municipal elections in May. The Platform Against Evictions activist group organized demonstrations outside Blackstone’s offices in New York, London, Madrid and Barcelona in March, and posted a video on its website accusing the firm of intending to evict “en masse.”
Anticipa, Blackstone’s mortgage servicing unit, took over the management of the loan portfolio two months ago, with about 75 percent of the debt classified as under-performing or non-performing, according to the people. It will take about seven years to restructure the debt, they said.
Blackstone may conduct an IPO of Anticipa in the coming years or convert the unit into the Spain’s first residential housing real estate investment trust, the people said.
Spanish home prices have fallen more than 42 percent since the peak in 2007, according to Tinsa, Spain’s largest homes appraiser. That’s left about a fifth of borrowers in negative equity, according to Villen. Lenders in the country foreclosed on more than 70,000 properties in 2014, with Andalusia, Catalonia and Valencia hit the hardest, according to the National Statistics Institute, which began compiling data at that start of that year.
Post Keys
Blackstone’s plan to allow homeowners to post the keys and walk away from their debts, a legal process known as dation in payment, is seen as a significant step by analysts.
“Unlike in the U.S. and other European countries, Spanish law stipulates a bank can foreclose on a home and still pursue the borrower for the rest of his life if the value of the loan is higher than the price that the bank forecloses at,” Villen said. “The offer of dation in payment is a refreshing way of approaching borrowers that are in negative equity.”
The private equity company will only foreclose on “strategic defaulters” who can pay but refuse to, while homeowners at risk of social exclusion, which represent about 3 percent of Blackstone’s portfolio, will be allowed to remain in their property paying subsidized rents, the people said.
Source: Bloomberg