Pop­u­lar Inc to sell $568m non-per­form­ing loans

The Pak Banker - - COMPANIES/BOSS -

Pop­u­lar Inc an­nounced to­day that Banco Pop­u­lar de Puerto Rico, its prin­ci­pal bank­ing sub­sidiary, has en­tered into a de­fin­i­tive agree­ment to sell a port­fo­lio of non­per­form­ing com­mer­cial and con­struc­tion loans, and com­mer­cial and sin­gle-fam­ily real es­tate owned, with a com­bined un­paid prin­ci­pal bal­ance on loans and ap­praised value of other real es­tate owned of $1,022 mil­lion and book value of $568 mil­lion, to an en­tity ma­jor­ity owned by a joint ven­ture be­tween Caribbean Prop­erty Group LLC and cer­tain af­fil­i­ated funds of Perella Wein­berg Part­ners As­set Based Value Strat­egy.

As a re­sult of the sale, Pop­u­lar will re­duce its non­per­form­ing as­sets by ap­prox­i­mately 28 per­cent, or $568 mil­lion. This trans­ac­tion will de­crease com­mer­cial non-per­form­ing loans by ap­prox­i­mately 57 per­cent, or $392 mil­lion, con­struc­tion non-per­form­ing loans by ap­prox­i­mately 45 per­cent, or $55 mil­lion, and other real es­tate owned by ap­prox­i­mately 45 per­cent, or $121 mil­lion. Pop­u­lar's pro-forma non-per­form­ing as­sets NPA ra­tio as of De­cem­ber 31, 2012 de­creases from 5.48% to 3.95%. The as­sets sub­ject to the trans­ac­tion are part of Pop­u­lar's non-cov­ered port­fo­lio in Puerto Rico and are not sub­ject to the loss shar­ing agree­ments with the FDIC.

The trans­ac­tion is ex­pected to re­sult in an af­ter-tax loss of ap­prox­i­mately $185 mil­lion, which will be rec­og­nized in the first quar­ter of 2013.

This trans­ac­tion will sub­stan­tially de­risk our bal­ance sheet and im­prove fu­ture prof­itabil­ity, said Pop­u­lar Inc. Chair­man and CEO Richard Car­rión. The pur­chase price for the as­sets is equal to 34% of the un­paid prin­ci­pal bal­ance of the loans and the ap­praised value of the other real es­tate owned as of the agreed cut-off date - (ap­prox­i­mately $347 mil­lion), ad­justed for cer­tain col­lec­tions and ad­vances made af­ter such date.

As con­sid­er­a­tion for the sale of the as­sets, Banco Pop­u­lar will re­ceive ap­prox­i­mately $112 mil­lion in cash, a note for ap­prox­i­mately $203 mil­lion as seller fi­nanc­ing and a 24.9% eq­uity in­ter­est in the pur­chas­ing en­tity.

Banco Pop­u­lar will also pro­vide an ad­vance fa­cil­ity of ap­prox­i­mately $35 mil­lion to cover cost-to-com­plete amounts and ex­penses of cer­tain projects, and a re­volv­ing work­ing cap­i­tal line of ap­prox­i­mately $30 mil­lion to fund cer­tain op­er­at­ing ex­penses of the ven­ture.

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