Popular, Inc. (Nasdaq: BPOP) (“Popular”) announced today that Banco Popular de Puerto Rico (“Banco Popular”), its principal banking subsidiary, has entered into a definitive agreement to sell a portfolio of non-performing 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 non-performing assets by approximately 28 percent, or $568 million. This transaction will decrease (i) commercial non-performing loans by approximately 57 percent, or $392 million, (ii) construction non-performing loans by approximately 45 percent, or $55 million, and (iii) 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. “We agreed to sell a significant portion of our NPAs, and as a result, we expect substantial reductions in credit-related expenses going forward. We have significantly improved our credit risk profile and are better positioned to manage our capital more effectively. This transaction constitutes another step towards the achievement of an optimal NPA level as we continue evaluating different de-risking opportunities.”
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.