Aareal Bank AG has sold a portfolio of nonperforming loans with an aggregate volume of approx. 690 million (including 107 million in interest and fees) to Lone Star. Aareal Bank thus reduced its non-performing loan portfolio by more than 20%, in a single transaction.
Wolf Schumacher, Chairman of the Management Board of Aareal Bank, qualified the sale of the portfolio as a "first step" towards the reduction of the bank's work-out portfolio: "This has not only improved our portfolio structure; it also permits us to use our internal resources even more targeted for further reductions. Moreover, the relief on capital means that we can use more of our equity in a targeted way, to generate further highly profitable new business", Mr. Schumacher added.
The portfolio sale was structured as a "true sale", in which the bank sold loan receivables (where the corresponding loan agreements had already been terminated) to the investor, together with the associated collateral. With this type of disposal, no residual risk exposure remains with the bank. The transaction, which is scheduled for completion by the end of July 2005, is Aareal Bank's first true sale involving non-performing loans.
Under the transaction, the investor acquires 578 loans relating to a total of 261 properties. The portfolio consists exclusively of non-performing loans in Germany, relating to commercial properties and commercial housing properties in equal proportions.
The transaction will not burden net income.
Mr. Schumacher said that the bank had identified "continued strong demand by international investors for transactions of this kind", adding that Aareal Bank is well placed to capitalise on this trend.
Source: Aareal Bank