Expectations for €1Bn mega bank assets deal

One of the biggest potential real estate deals in Portugal this year is reaching its decisive phase.

David Kempner and the Bain/Cerberus consortium have submitted firm offers for the ECS restructuring funds. Several banks in Portugal will select a buyer by the end of the year.
The banks had already selected a shortlist of three investors in April for the second case of the sale process of the ESC restructuring funds.
David Kempner and Bain-Cerberus have decided to make firm offers and submitted these within the deadline which ended on Monday. Oaktree has pulled out.
The deal is for a portfolio of luxury hotels, including the Conrad Algarve, Cascatas Golf & Resort Spa (Hilton) and the NAU group, the La Vie shopping malls among other real estate assets in a transaction that could make €1Bn (reserve price set by the banks).
These assets are held by the main banks operating in Portugal via share fund units which are managed by ESC, a company owned by Fernando Esmeraldo and António de Sousa.
According to information compiled by ECO online, it is expected that the buyer will be chosen by the end of the year, with the deal being sealed at some time in the first half of the year. A source close to the operation suggested the there was the risk that the deal could fall through. If it does go through, it will mean Portugal will have another bumper year in terms of overseas real estate purchases and investment.
During the phase that has now ended, the banks had been negotiating directly with the interested parties over the purchase contract as well as discussing possible sources of financing for the operation.
Negotiations will now become more complex and the banks (Novo Banco and Caixa Geral de Depósitos) will want to sell the assets for the best price possible. Santander and Oitante (a financial vehicle created to generate Banif assets which were not bought up by Santander) also have share units in the ECS funds.
In relation to potential buyers, Davidson Kempner, Bain and Cerberus have done business with Portuguese banks in the past and are well known investors on the international market.

Founded in 2006, ECS is a leading private equity and restructuring firm focused on the Portuguese market. ECS currently manages four funds directly in Portugal. ECS’s mission is to release the potential of its fund’s companies, partnering with management teams and stakeholders, generating sustainable long-term returns. The firm decides on investment structures and acts as lead equity investor not only in companies that have significant growth potential, but also distressed companies that have long-term economic potential. ESC investment activities are focused on expansion capital financing, management buy-ins, management buy-outs, buy and build and recapitalisations.