Aareal Bank has sold a fourth portfolio of nonperforming loans (NPLs) the largest to date, with a volume of around €1.4 billion to the Japanese Shinsei Bank Limited. Shinsei Bank is a leading NPL investor in Germany with a minority stake in SGK Servicegesellschaft Kreditmanagement mbH, an NPL asset management company.
The portfolio comprises predominantly non-performing loans. The results of the transaction comply with the targets for 2006 communicated to date, restoring the bank's ability to distribute dividends. With this transaction, Aareal Bank has now reduced its non-performing loan portfolio to under €0.7 billion. The parties have agreed not to disclose the terms of the sale; the agreed consideration is in the
three-digit million euro range.
Under the transaction, the investor acquires 847 loans relating to a total of 852 properties, including residential as well as commercial properties. Hermann Josef Merkens, member of Aareal Bank's Management Board responsible for the transaction, welcomed the renewed portfolio disposal thus: "We have managed to reduce our non-performing loan portfolio faster, and to a larger extent, than anticipated". Aareal Bank has sold a total of four NPL portfolios since June 2005, with an aggregate volume of around €2.2 billion.
Mr. Merkens added that the bank has "already achieved key target for 2006: the sustained reduction in its NPL portfolio". The relief on capital means that we can use more of our equity in a targeted way, to generate further highly profitable new business", he added. Noting that the successful implementation reflects Aareal Bank's extensive know-how regarding such complex transactions, Mr.Merkens emphasised that it was "thanks to the outstanding efforts and commitment of our staff that the reduction target could be achieved earlier than planned".
In contrast to earlier transactions, a key feature in marketing this portfolio is a transfer of the non-performing loans concerned to Aartemis Credit Management GmbH (a wholly-owned subsidiary of Aareal Bank), by way of partial universal succession. The investor has already assumed the economic risk exposure to the overall portfolio, from the time of executing the transaction documentation.
Shinsei Bank Limited will, in turn, take over the portfolio by acquiring the capital of Aartemis by the end of the first quarter of 2007. Mr. Merkens concluded his comments by characterising the successful reduction
of Aareal Bank's NPL portfolio as a "key milestone" in the bank's realignment: "This allows us to focus our energy even more intensly on the future development of our core Structured Property Financing business."
Source: Aareal Bank