Global Debt Sales survey 2012 - Vastgoedjournaal

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MARKET OVERVIEWIs leverage on the way back?With the availability of equity not a major issue, the availability and cost ofleverage is key to whether deals are able to close.“If anything, the cost of secured funding for the acquisition of performingloan portfolios has remained stable or even slightly improved on the backof banks re-entering the fray, as well as the emergence of new funders,including insurance companies,” says Philippe Tapernoux, Head ofFinancial Institutions Debt Advisory in the UK. A buyer concurs: “Bankshave slowly overcome their fears of secured funding. This is starting tobe reflected in the cost but not yet in the advance rate or maturity.”The funding cost often stays higher than the yield on assets and,with conservative assumptions, buyers must take on refinancingconditions in one, two or three years, meaning lower bid prices.The situation does not affect every buyer in the same manner.Traditional, longer-term performing mortgage portfolios targetedby private equity houses will be impacted with transactionsharder to close given the gap between loan yield versusfunding costs, and loan term versus available funding terms.On the other hand, strategic bank buyers have the ability touse retail deposits or covered bonds as an additional sourceof funding, and established buyers in areas where thereturns are higher, such as consumer NPLs, can also tapthe corporate high yield bond market. A recent exampleis debt purchaser Lowell’s GBP200 million issue atan annual interest rate of 10.75 percent with a 2019maturity in March 2012. In the non performing CREdebt sale market, recent financing deals have beenat 600 basis points, which seems to effectively havebecome the benchmark price for such deals.“The cost of secured funding for theacquisition of performing loan portfolios hasremained stable or even improved as banksre-enter the fray and new funders emerge.Philippe Tapernoux, Head of Financial Institutions Debt Advisory, KPMG in the UK”12 GLOBAL DEBT SALES SURVEY © 2012 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity.
MARKET OVERVIEWAre new entrantsaggressive movers?A substantial number of US funds – notably Centerbridge, Baupost,Kennedy Wilson and DE Shaw & Co – have entered the market in Europein the last 2 years. The US market is very competitive, with returns beingsqueezed, prompting many funds to look beyond their home market.There are concerns that the aggressive pricing strategies adopted bysome funds, with target equity IRRs in the low-to-mid teens, will squeezeincumbents out of the market.In particular, we have seen a large focus from US investors on marketssuch as Spain and Ireland, where they have recently transacted forthe first time. Entering a new market doesn’t come without its risksand choosing the right servicing partners or anchor portfolio/platforminvestment is often critical for future success.“You have a new breed of hungry US investors chasing higher returnsthan they can achieve at home – and they are pricing the deals accordingly,”says Stuart King, Global Co-Leader of the Portfolio Solutions Group.In addition, we are seeing a number of large Australian performingresidential mortgage investors focusing their attention on Europe (mostnotably the UK and Ireland) looking for anchor portfolio/platforms fromwhich to grow their European presence. This has been evidenced byPepper Home Loans’ reported acquisition of a major US bank’s Irishresidential mortgage business.“”Stuart King, Global Co-Leader, KPMG’s Portfolio Solutions GroupYou have a new breed of hungry USinvestors chasing higher returns than theycan achieve at home – and they are pricingthe deals accordingly.© 2012 KPMG International Cooperative (“KPMG International”), a Swiss GLOBAL entity. DEBT SALES SURVEY 2012 13
Page 1 and 2: Global DebtSales survey 2012Portfol
Page 7 and 8: MARKET OVERVIEWBasel IIIIncreasing
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Page 14 and 15: Assets comingto marketSpain, the UK
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Page 20 and 21: COMPLETING TRANSACTIONSWhat types o
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Page 26 and 27: A GLOBAL PERSPECTIVEclosing experie
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Page 30 and 31: About theresearchKPMG conducted an
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