Global Debt Sales survey 2012 - Vastgoedjournaal

A GLOBAL PERSPECTIVEUNITED STATES Hernan MagarinosDirector, Portfolio Solutions Group, KPMG in the USWhen IBRC (formerly Anglo Irish Bank) sold a very large US$9.5billion loan portfolio in a single transaction, we expected that saleto be an inflection point and a precursor to increased activity.Though the loan sales activity has picked up slightly, large portfoliotransactions have not materialized and we have only seen a handful oftransactions over US$200 million. However, every piece of analysis we dopoints to more activity in the coming months. According to Trepp, thereis as much as US$1.7 trillion of real estate loans coming due in the next5 years and as many as 50 percent of those are under water.The larger banks are better capitalized due to better access to capitalmarkets and therefore in a better position to sell loans. It is estimatedthat currently there could be up to 800 banks on FDIC’s ‘problem bankslist’. These banks typically are trading on very low amounts of capitalwith few prospects of raising new equity. Taking into account potentialwrite-offs, they are already at the point where they should be on FDIClists and/or should have been liquidated. These banks are trying to ‘extendand pretend’ but with new maturities coming due, something will haveto give. We believe there will be extra force for these banks to sell moreassets, using creative structures that will allow them to maintain aminimum capital level.Another factor that has slowed sales of non-performing loans was thederegulation in Troubled Debt Restructurings (TDRs), which has effectivelyallowed banks to re-classify loans as TDRs so long as they are able torestructure under ‘market conditions’. This could be making some banks’balance sheets look healthier than they really are. You would have to askwhether some of these TDRs are not just future NPLs.In terms of market activity, there is interest for both performing andnon-performing loans, which is a change from recent years when therewas limited buyers’ appetite for performing loans. Now we are seeinginterest from commercial banks to buy performing assets or financeother buyers’ acquisitions, whereas for non-performing loans the mainplayers are still the specialist funds.The main asset class in the market is CRE. There is appetite frombuyers for C&I (Commercial & Industrial) and PFI (Project Finance)loans, but since these assets are pretty stable most banks arereluctant to sell them.US$1.7trnReal estate loans coming duein the next five years in the US© 2012 KPMG International Cooperative (“KPMG International”), a Swiss GLOBAL entity. DEBT SALES SURVEY 2012 29