Spain's Santander sells troubled loans as prices plummet

Thu Mar 7, 2013 2:50pm EST
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By Sarah White and Tommy Wilkes

MADRID (Reuters) - Spanish lender Santander (SAN.MC: Quote) has sold a package of 300 million euros ($393 million) of troubled consumer loans to a U.S. hedge fund at a massive discount, the latest sign that Spain's banks are increasing efforts to clear their books.

Elliott Management, a fund that specialises in buying distressed assets, paid 12 million euros for the portfolio, for a 96 percent discount, a source with knowledge of the transaction said on Thursday.

Elliott and Santander declined to comment on the deal.

It was the latest in a string of heavily discounted disposals by Spanish banks, which are starting to shift problematic assets as they clean up their books after taking a big hit from writedowns on soured property deals last year.

In particular, portfolios of consumer credits gone bad have been among the easiest to sell, as the loans are unsecured and offer banks a lesser chance of recovering money or assets from struggling borrowers and the banks are willing to part with them for small amounts.

Troubled consumer credits, particularly those that have been in arrears for 12 months of more, are also often already provisioned for at 100 percent, easing the pain for the banks selling them.

"We're seeing more of these deals happening now, whether it's consumer loans, loans to small businesses or credit card portfolios. These are often completely provisioned for or already off banks' balance sheet," said a Madrid-based investment banker advising on such transactions.

"REAL SPECIALISTS"   Continued...

A car drives past the logo of Spanish Santander bank in a roundabout outside the company's headquarters in Boadilla del Monte, outside Madrid, January 31, 2013. REUTERS/Sergio Perez