Commerzbank ups size of German NPL sale

Project Gobi will be revealed to prospective bidders at the end of the week.

Commerzbank has increased the size of a portfolio of German real estate non-performing loans it is bringing to market in the latest disposal from its former Eurohypo business, PDI sister title Real Estate Capital reported.

The bank is set to release the data tape containing loan and asset level data relating to the NPL portfolio, called Project Gobi, to prospective bidders at the end of this week. It is expected to reveal a portfolio with an unpaid balance of between €900 million and €1.1 billion, according to a source close to the bank.

The size of the Gobi portfolio is larger than the approximately €800 million initially planned, after more assets were added. The portfolio is one of the first large German property NPL sales by a domestic bank since the financial crisis, and loan portfolio buyers are hoping a successful process will trigger more.

The former Eurohypo portfolio is said to contain loans made to a total of 170 borrowers secured against 300 assets. Close to half of the book is made up of small residential exposures of up to €5 million; the remainder comprises loans secured on “larger commercial assets, although there are not many exposures above €20 million” said the source.

There is a lot of appetite for the loans with more than 20 interested parties, and it is likely that hopeful buyers will team up given the mixed nature of the portfolio. These are thought to include the likes of Cerberus, Apollo, Oaktree and Kildare Partners.

Commerzbank is conducting the sale without the help of an adviser after successful sales in 2013 and 2014 of the former Eurohypo UK and Spanish loan books. The first bid phase is expected to commence in around six weeks’ time, with a further eight weeks until completion.

Commerzbank had a total of €2.1 billion German NPL exposure according to its third quarter 2014 results. Its fourth quarter results are out next week.

The bank is also thought to be mulling sales of its approximately €1.3 billion Italian book and its Dutch / Benelux loans.

Meanwhile, Goldman Sachs’ asset management subsidiary Archon Group recently sold a portfolio of German NPLs with a face value of €650 million to German retail and financial services company Otto Group.

The sale was at a deep discount, with the purchase price estimated at between €50 million and €60 million. The loans are close to half unsecured, and half collateralised by residential property.