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By Claire Ruckin
LONDON, April 15 European commercial banks are
actively managing loan exposure and are more willing to sell
loans for stressed and distressed companies quickly in Europe's
secondary market as distressed investors line up to buy the
The recent boom in distressed debt investing in Europe after
an influx of US investors, means that banks are able to get
better prices for loans to struggling companies as distressed
investors compete to buy the paper.
Commercial banks were previously 'buy and hold' investors,
particularly to domestic companies that they had close ties
with, and were reluctant to sell loans for fear of damaging
relationships with top local borrowers.
Banks are now able to make quick decisions to sell loans for
troubled companies, such as listed Spanish media giant Promotora
de Informaciones (Prisa) at a far smaller discount than
was previously required.
"Until now banks were holding paper and never selling but
that has all changed. One of the main drivers is the price they
can now fetch as a result of the distressed funds coming over to
Europe," a banker said.
European commercial banks' more pro-active approach to
selling loans started in mid-2011 after regulators stepped up
pressure on banks to strengthen their capital buffers.
Many European banks chose to sell loans in large portfolio
sales to free up capital, rather than raise expensive equity.
This weakened the relationship between bank and borrower and
banks are now willing to sell out of loans to companies after
bad news to limit future losses.
Banks' changing attitudes were first seen at the end of
2013, when French banks sold out of struggling French retailer
"We saw the French banks selling out of Vivarte and getting
a great price for the loans. When we saw the French banks
selling in the 80's we should have sold. It is now trading in
the 40's," an institutional loan investor said.
Banks also quickly sold out of Europe's biggest parking
management firm Apcoa quickly in late 2013 - mostly to
distressed investor Centerbridge - in a move that will see
French private equity firm Eurazeo lose control of the company.
This year, banks have also sold loans in vending machine
business Autobar in March before lenders hired Houlihan Lokey to
advise on a potential restructuring of the company's 800 million
euro ($1.11 billion) debt.
Loans in UK services provider PHS were also sold at the same
time as a potential debt restructuring loomed. The company is
trying to negotiate a covenant waiver with its lenders.
Several banks are selling loan exposure to Prisa, which
restructured nearly 3 billion euros of debt with its creditors
As part of the agreement, Prisa committed to reduce its debt
by a further 900 million euros by 2015 and by another 600
million euros by 2016 by various options including debt
"Banks are selling some of their exposure in Prisa now as
they can get a good price. This also pushes up the price at
which the company might conduct a debt buyback," a loan trader
BNP Paribas sold a 50 million euro block of loans in Prisa's
tranche 2 and tranche 3 debt in an auction last Friday, banking
sources said. The paper sold at around 75-80 percent of face
BNP owns around 100 million euros of Prisa's debt. HSBC is
one of the largest debt holders, with a position of around 500
million euros, bankers said.
The auction follows a similar sale by Spain's Novagalicia
Bank of around 33 million euros of Prisa's tranche 2 and 3 loans
earlier this month for around 77.5 percent of face value.
Prisa's loan pricing rose to 76.8 percent of face value on
Monday, compared to 69 percent of face value at the beginning of
March, according to Thomson Reuters LPC data.
($1 = 0.7238 Euros)
(Editing by Tessa Walsh)