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French banks sell global loan portfolios

French banks selling syndicated loans globally to raise capital; Portfolios already circulated to would-be buyers; Some sales already completed

October 15, 2011 4:28 by



French banks have put global syndicated loan portfolios up for sale, including dollar loans to highly rated companies and project financings, in a bid to cut balance sheets and comply with the EU’s compulsory recapitalisation plan.

The European Commission’s recapitalisation plan could result in billions of dollars of loan sales globally as banks try to sell assets rather than raise capital at depressed equity prices or through dislocated and expensive bond markets.

BNP Paribas and Societe Generale are leading the drive to reduce balance sheets after recently announcing plans to offload a combined 150 billion euros of risk-weighted assets, banking sources said.

“BNP and SG have been selling out of three main locations — London, New York and Hong Kong. They have had some success. I know they’ve made sales, but I don’t know how much has been sold. The sales definitely include project finance assets,” a banker said.

Details of the recapitalisation plan have yet to be finalised, but capital ratios are expected to be raised to 9 percent of risk-weighed assets or more.

BNP and SG were already deleveraging to enable the banks to be fully compliant with Basel III capital adequacy ratios by the end of 2012, but both banks have stepped up loan sales in the last two weeks, bankers said.

Credit Agricole CIB and Natixis have also been making enquiries on selling loans, loan traders said.

BNP’s deleveraging is focusing on selling dollar assets, a process that the bank said on Friday was going well. Societe Generale declined to comment.

A diverse range of loans have been put up for sale. Most are investment-grade credits for highly rated companies in the Middle East and Russia as well as Asia and the United States. Some leveraged loans for riskier non-investment grade companies have been included, the sources said.

The loans for sale are performing near-par loans of good credit quality, which are being offered for sale at around 97-98 percent of face value, they added.

Sales are being executed through the secondary loan trading markets or in bespoke sales direct to investors. The sellers are not under pressure and will only trade when they get good execution, the bankers said.

BNP is also considering putting its U.S. project finance book up for sale, a banking source said, in a move that might be copied by other European banks, including UK, Italian and German lenders.

Appetite for Middle Eastern loans, which include project financings, is said to be strong from regional and domestic bank buyers.

“We have simply accelerated a bit what we were going to do. This plan is not only dollars, it is to sell every kind of asset. It is not a fire sale, it’s just to sell the good assets we have,” a banker at a French bank said. (By Tessa Walsh)



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