UPDATE 1-Commerzbank sells 5 bln euros of UK property loans
Fri, Jun 21 2013
Mon Jul 15, 2013 9:41am EDT
* Wells Fargo buys performing assets, Lone Star distressed loans
* Transaction eclipses Lone Star's 2011 Lloyds deal
* Commerzbank agrees to 3.5 percent discount
* Bank's shares up 5 pct
FRANKFURT, July 15 (Reuters) - Germany's second-biggest lender Commerzbank has sold British property loans worth 5 billion euros ($6.5 billion) to U.S. rival Wells Fargo and private equity firm Lone Star Funds to shrink its loan book and reduce risk.
Commerzbank said on Monday that it agreed to a 3.5 percent discount on the loan portfolio's book value.
Wells Fargo is acquiring the performing loans, while Lone Star is scooping up the 1.2 billion in non-performing assets, Sascha Klaus, board member of Commerzbank's mortgage unit Hypothekenbank Frankfurt - formerly known as Eurohypo - said in an interview published on Commerzbank's intranet and seen by Reuters.
Distressed debt and equity investor Lone Star recently boosted its European staff numbers as it looks to buy portfolios of underperforming real estate debt from banks. In 2011 it bought a 900 million pound ($1.4 billion) portfolio from Lloyds Banking Group at a price sources said represented a discount of up to 40 percent.
Banks around the world have been trying to streamline assets, but few deals have materialised as buyers and sellers often disagree on valuations.
However, the low-interest environment, which leaves holders of some government bonds with hardly any returns, increases the attraction of higher-yielding alternatives. That has led to investors agreeing to lower discounts when buying risky assets such as non-performing mortgages.
"The expectations for returns have come down in certain markets due to the high liquidity (supplied by central banks)," Commerzbank's Klaus said.
The bank's lending deals included the Westfield Stratford City shopping centre next to the Olympic stadium in London and Europe's most expensive block of flats, One Hyde Park, near Harrods department store in central London.
Metzler Securities analyst Guido Hoymann described the 3.5 discount agreed by Commerzbank as "only a small amount", but added that the deal does not lead to a significant improvement of the bank's capital base.
Commerzbank shares extended gains after the announcement. They were up 5.1 percent at 1332 GMT, making the bank the top climber among Germany's blue-chip companies.
Commerzbank shares had risen by 3 percent in early trading after a magazine report that Germany has spoken to the chairman of UBS about the possibility of the Swiss bank buying the government's remaining Commerzbank stake.
