Banco Popular Completes Sale of Construction and Commercial Real Estate Loans
September 29 2011 - 5:46PM
Business Wire
Popular, Inc. (Nasdaq: BPOP) announced today that Banco Popular
de Puerto Rico, its principal banking subsidiary, completed the
sale of a portfolio of construction and commercial real estate
loans with an unpaid principal balance and net book value of
approximately $358 million and approximately $148 million,
respectively. The purchaser is a newly created joint venture (the
“Joint Venture”), which is majority owned by a limited liability
company to be created by Goldman Sachs & Co., Caribbean
Property Group LLC and East Rock Capital LLC.
The loans were sold at a price essentially equal to their book
value and Banco Popular will not recognize any significant gain or
loss on the sale.
The following is a summary of the principal terms of the
transaction:
- The purchase price for the transaction
is equal to 45.3% of the unpaid principal balance of the loans as
of March 31, 2011 (approximately $381 million), adjusted for
certain collections and advances made after such date.
- As consideration for the sale of the
loans, Banco Popular will receive approximately $48 million in
cash, a note for approximately $86 million as seller financing and
a 24.9% equity interest in the new Joint Venture.
- Of the $148 million in book value of
loans sold, approximately $91 million, or 62%, are construction
loans and approximately $57 million, or 38%, are commercial
real-estate loans.
- Approximately 97% of the loans sold
were classified as non-performing loans.
- Banco Popular will extend a $68.5
million advance facility to the Joint Venture to cover unfunded
commitments and other costs to complete the construction projects
and a $20 million working capital line of credit to fund certain
expenses of the Joint Venture.
- The parties have agreed that no
distributions may be made by the Joint Venture to its equity
members until all the credit facilities have been paid in full and
all commitments to lend terminated. In addition, any distributions
by the Joint Venture to its equity members, including Banco
Popular, will be made on a pro rata basis according to their
proportionate interest in the entity.
- The Joint Venture will engage CPG
Island Servicing LLC, an affiliate of Caribbean Property Group, as
servicer of the purchased loans. At the same time, the servicer
will enter into a subservicing agreement with Archon Group LP, an
affiliate of Goldman Sachs, under which it will provide certain
subservicing functions with respect to the purchased loans.
Richard Carrión, Chairman and CEO of Popular, Inc., stated:
“This transaction is an important step; one of several initiatives
the Corporation is pursuing to continue to derisk its balance
sheet.”
Founded in 1893, Popular, Inc. is the leading banking
institution by both assets and deposits in Puerto Rico and ranks
36th by assets among U.S. banks. In the United States, Popular has
established a community-banking franchise providing a broad range
of financial services and products with branches in New York, New
Jersey, Illinois, Florida and California.
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