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.