First BanCorp to Sell Commercial Loans
First BanCorp, the bank holding company for FirstBank Puerto Rico, announced that the bank has entered into three separate agreements to sell a total of $532 million of unpaid principal balance in commercial loans or $315 million of book value for a total price of $201 million, or 38% of unpaid principal balance.
These transactions will result in a pre-tax loss net of reserves of approximately $65 million. At the completion of the transactions, FirstBank will reduce its nonperforming assets by approximately 23% or $282 million. FirstBank’s pro-forma non-performing asset to total asset ratio as of December 31, 2012 decreases from 9.45% to 7.30%.
On March 28th, FirstBank completed the sale to Lone Star Funds of a portfolio of non-performing and classified commercial real estate loans, construction loans, and commercial loans with an unpaid principal balance of $378 million and book value of $216 million. The purchase price for the assets is equal to 31.8% of the unpaid principal balance of the loans, or $120 million in an all cash transaction. The transaction will result in a pre-tax loss, net of reserves, of approximately $60 million, including estimated transaction expenses.
FirstBank has also entered into two agreements, a definitive agreement and a letter of intent, with other third-party investors to sell an additional $154 million of unpaid principal balance and $99 million of book value in nonperforming commercial and construction loans, which could occur in the second quarter of 2013. The combined sales price for the two transactions under agreement is $81 million, or 52% of unpaid principal balance. These transactions will result in a pre-tax loss net of reserves of approximately $5 million.
“Through aggressive remediation, these transactions are a positive step as we work toward achieving our goal of substantially reducing problem assets. While there is an impact to earnings, these transactions greatly improve our credit risk profile,” said First BanCorp’s president and CEO Aurelio Alemán. “In addition to improving our risk profile and reducing expenses, these transactions will free up time for management to focus on growth opportunities.”