Eastern And Central Europe Display Symptoms Of

Eastern And Central Europe Display Symptoms Of
CEE is likely to become the following hot sector for distressed asset trades following some of the biggest international asset managers have indicated a definite willingness to be buyers for a stock portfolio of Romanian non-performing loans.

The investment portfolio, referred to as Project Neptune, is being sold by Erste's subdivision Banca Comerciala Romana, Romania’s largest financial institution. It is made up of ailing business and real estate property financial loans worth roughly 2 billion Euros.

International interest in CEE non-performing loans was unexpected but it is showing signs of solid development. A crucial event took place the previous summer season, when Volksbank Romania sold off the first big portfolio from the market since the financial crisis.

Sector professionals have suggested the deal helped put developing Europe on the map for global shareholders. "When we acquired the orginal investment portfolio from Volksbank, there were just a few other individuals thinking about it," says Ahmed Hamdani, co-chairman of European real estate at HIG’s credit subsidiary Bayside Capital.

Martin Machon, CEO of APS Holding, said that "As profit margins in Western Europe have fallen, we have seen more offshore businessmen looking at Eastern and central Europe on account of the premiums offered," he says.

The prospect of asset flow in the area stays large. According to a current study by Raiffeisen, at the end of 2014 non-performing loans made up 13% of the whole amount in Romania, thirteen point three percent in Hungary and over 16 percent in Bulgaria, Slovenia and Croatia. In Serbia, the amount was as much as 23 percent. "We’re still at an extremely initial phase of banking deleveraging in these nations," explains Hamdani.

Rising asset size has been a tremendous element of offering a push to the Eastern and central Europe sector. "For many years right after the recession, there was a massive pricing disparity and banks couldn’t afford to sell except in a size that was way too small to draw the attention of foreign businessmen," states Martin Machon.

Machon also specifically commented on the reality that the central and Eastern Europe space will remain a complicated sector for offshore investors, primarily as a result of its states’ small populations.

The shortage of reliable associates on location in Eastern and central Europe can also be a big difficulty for global stock investors, as per Hamdani. "It is important to have a regional partner for these contracts," he explains, "but numerous local businesses are not up to global benchmarks in terms of corporate governance or capability."

The candidates chosen to proceed through to the last round of the tender for Project Neptune include conglomerates ran by Deutsche Bank and Blackstone, as well as solitary bidder Lone Star. Deutsche Bank has teamed up with Sankaty Advisors, the loan investment division of Bain Capital, and Boston-headquartered hedge fund The Baupost Group, while HIG Capital and AnaCap Financial Partners - both private equity investors - are joining forces with Blackstone.
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