Just two months after announcing its intent, First BanCorp on Wednesday confirmed it has entered into a definitive agreement to sell a loan portfolio with an unpaid principal balance of $516.7 million to a newly created joint venture between Goldman, Sachs & Co. and Caribbean Property Group.
The new buyer, to be known as PRLP Ventures LLC, will pay $275.9 million of the value of the portfolio, or 53.4 percent of the unpaid principal balance, company officials said.
The loan sale comes as the parent company of First Bank announced its fourth quarter results showing a net loss of $157.7 million, representing nearly a 200 percent increase from the $53.2 million in losses reported for the same year-ago quarter ended Dec. 31.
The current period’s losses are just a significantly higher in comparison to the third quarter of 2010, when the figure reached $75.2 million, but take into account the loan portfolio to be sold.
PRLP Ventures LLC will take over the crippled loan portfolio consisting mostly of construction loans, which represent 74 percent of the balance, 19 percent in commercial real estate loans and 7 percent in commercial loans. PRLP will put up $90 million in cash, another $138 million will come from a loan from FirstBank, which will retain a 35 percent equity in the joint venture worth $48 million
Through the loan sale, First Bancorp will reduce its classified assets and non-performing loans by $410.3 million and $254.3 million, respectively. The transaction will decrease its local non-performing construction and commercial real estate loans by 72 percent and 16 percent, respectively, and its Puerto Rico classified residential constructions loans by 74 percent.
“The completion of this transaction is an important step in the corporation’s previously discussed strategic plan to improve the quality and performance of our loan portfolio,” said First BanCorp CEO Aurelio Alemán. “This transaction reduces our non-performing loan portfolio by 17 percent.”
First BanCorp’s loan portfolio has been its Achilles heel for the past several years, as the economic weakening brought to a halt most construction and commercial projects on the island. Loan defaults have been at an all-time high, leaving banks with unproductive assets.
However, things may be looking up for the bank, which stated in its fourth quarter report that, excluding the impact of loans transferred to held for sale, the provision for loan losses decreased to $93.4 million, down from $120.5 million for the third quarter of 2010.