Mr. Martin Paev, CFA, Chairman of SORTIS Group, was a speaker at the 4th Debt & Restructuring Forum, which took place on 27th June 2019 at Marriott Hotel in Vienna, Austria.
Global investors, banks and advisors discussed the overall environment for distressed debt and restructuring across Europe and what investors should look out for in 2019 and 2020.
Mr. Paev spoke at the Investors’ Outlook panel lead by Leo Morozov, Head of
Non-Core and Real Estate Assets at Fortenova grupa d.d.
Participants at the panel were also:
• Patrick Wigan, Director at Wigan Acquisitions
• Alessandro Pappalardo, Chief Investment Officer at DDM Group
• Louis Gargour, Managing Partner, Chief Investment Officer at LNG Capital
On the question about the status of the property market in Bulgaria, Mr. Paev stated that real estate prices are rising but their growth rate is now slowing down. Construction in the country is also booming and is already approaching the peak levels of 2007-2008.
Mr. Paev also stated that historically low and negative interest rates are creating stimuli for investors to seek alternative deployment of their money. This includes instruments with low-to-moderate risk and relatively low returns, compared with private equity and mezzanine. For example, if PЕ investors are looking for 20-25% p.a. and Mezzanine lenders seek 10-15%, interest rates for private debt are usually in the range of 5-10%.
Non-performing Loan (NPL) portfolios sold in Bulgaria in 2018 reached almost €1 Bn, a 150% growth compared to €400 M in 2017. Expectations for 2019 are that the volume would again be close to, or may even exceed the €1 Bn mark. Some of the reasons behind the active NPL sales recently include:
• Asset Quality Reviews and stress tests of the largest banks and the need of NPL reduction from current levels (7-8%) to the EU
average of less than 5% of loan portfolios.
• Bank acquisitions – Piraeusbank was acquired by Postbank, Societe Generale was bought by OTP Baml, KBC completed the acquisition of United Bulgarian Bank.
• Introduction of IFRS 9 and its impact on banks’ balance sheets.
• Collection agencies are growing stronger and are becoming more active in corporate loans and value creation – e.g. turnaround management and working out properties. They now have access to funding by International Financial Institutions like the European Bank for Reconstruction and Development.
Mr. Paev further summarized some of the recent larger NPL deals in Bulgaria:
• Postbank sold €350 M corporate NPLs to EOS Matrix (March 2019);
• United Bulgarian Bank sold €260 M loans (March 2019);
• Unicredit Bulbank is selling a portfolio of ca. €250 M consisting of €150 M SME loans and €100 M. consumer loans;
• Piraeusbank is selling €126 M loans, €120 M corporate loans and €6 M consumer loans;
• Frontex is selling €85 M in a secondary deal.
Some of the potential upcoming deals with NPL portfolios are:
• First Investment Bank – €220 M corporate loans (nearly €140 M. of which is secured debt);
• Postbank – €100 M;
• United Bulgarian Bank – €100 M;
• DSK Bank – over €50 M;
• Raiffeisen will probably have several small auctions, too.
About SORTIS Group:
SORTIS Group is a Bulgarian group of companies active in mergers & acquisitions, private equity, venture capital, loan advisory, and hotel management. SORTIS is a member of the international Globalscope M&A Advisors network.