First Bancorp (FBP)

[CHA-RU]

First BanCorp Announces Loan Sale and Accelerates De-Risking of Balance Sheet
First Bancrp (NYSE:FBP)
Intraday Stock Chart
Today : Wednesday 8 December 2010
First BanCorp (the “Corporation”) (NYSE:FBP) announced that it has signed, on December 7, 2010, a letter of intent to sell approximately a $701.9 million loan portfolio, with a net book value of $602.8 million, of which approximately 95% are adversely classified. The buyer is a new joint venture entity, majority owned by a global financial services firm.

The Corporation’s primary goal with respect to this transaction is to accelerate de-risking and improve the Corporation’s risk profile. It will reduce the Corporation's classified assets and non-performing loans by approximately $574.7 million and $301.6 million, respectively. The transaction will decrease the Corporation’s Puerto Rico non-performing construction and commercial real estate loans by 58% and 27%, respectively, and its Puerto Rico classified residential construction loans by 64%. The $602.8 million net book value portfolio is composed of 67% construction loans, 27% commercial real estate loans and 6% commercial loans.

The Corporation expects to receive approximately $401.9 million, or a purchase price of 57.25% of the $701.9 million unpaid principal balance of the loans as of September 30, 2010, each to be updated from collections prior to the closing date. The Corporation will recognize an estimated pre-tax loss of $112.1 million in this transaction, after taking into consideration the specific reserves of $88.9 million already assigned to the $602.8 million of the loans net book value. Considering the net book value and the specific additional reserves of the loans being sold, the transaction will have a modest impact on capital ratios.

As a consideration for the sale of the loans, the Corporation will receive $130.0 million in cash, a note for 50% of the purchase price as seller financing, and a 35% interest in the new joint venture. In addition, the Corporation will be providing additional financing to cover unfunded commitments for the completion of the construction projects.