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Banking Financial District

Popular completes sale of non-performing loan portfolio

Popular Inc.'s Hato Rey headquarters.

Popular Inc. announced Thursday that its subsidiary Banco Popular de Puerto Rico, completed the sale of a portfolio of mostly non-performing construction and commercial real estate loans with a book value of about $148 million. The loans carry an unpaid principal balance of approximately $358 million, the financial institution announced late in the day.

The buyer is a newly created joint venture majority-owned by a limited liability company to be created by Goldman Sachs & Co., Caribbean Property Group LLC and East Rock Capital LLC.

Details of the transaction revealed that the buyers will pay about $381 million, or 45.3 percent of the unpaid principal balance of the loans as of March 31, 2011. Popular will receive some $48 million in cash, a note for about $86 million as seller financing and a 24.9 percent equity interest in the new joint venture.

Because the loans were sold at a price essentially equal to their book value, Banco Popular will not recognize any significant gain or loss on the sale, Popular said.

“This transaction is an important step; one of several initiatives the corporation is pursuing to continue to derisk its balance sheet,” said Popular Inc. CEO Richard Carrión.

Of the $148 million in book value of loans sold, approximately $91 million, or 62 percent, are construction loans and about $57 million, or 38 percent, are commercial real-estate loans.

Popular had been looking to unload its loan portfolio for some time, walking away from a similar transaction earlier this year, after falling short on reaching an agreement with a third-party joint venture.

About 97 percent of the loans sold this time 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.

Author Details
Author Details
Business reporter with 30 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other segments of Puerto Rico’s economy.

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