After a successful 2015, the non-performing loan (NPL)
market slowed down slightly at the start of 2016. However, in
the second quarter many banks, including Bankia, Banco
Sabadell, Abanca and Cajamar, of various billions launched NPL
portfolios for nominal amounts. These portfolios include both
secured and unsecured loans. A significant number of NPL
portfolio transactions are currently on the market; they will
close before July 30.
The way in which sellers structure the transfer of the NPL
portfolio differs depending on whether the transaction is
structured as an assignment of the contractual position under
the loan agreements, or as a sale of the credit rights derived
from an accelerated loan.
As a principle, both are covered by the Civil Code and there
are no particular advantages or disadvantages to either. This
is because under article 1,528, both imply a credit transfer
and all of the correspondent ancillary rights.
However, the key difference is that an assignment of the
contractual position does not require acceleration of the loan
agreements. It can therefore be accelerated at any time by the
new creditor, but it is necessary in the sale of credit
Sellers understand that the advantage of selling an
accelerated loan does not require confirmation that assignment
restrictions are included in the loan documentation and are
therefore freely transferable. Purchasers need to ensure that
the loans have been duly accelerated, or that there is a
guarantee to accelerate them, if a borrower challenges the
acceleration of the loan. This is because the purchaser may not
have the contractual capacity to declare the acceleration.
One advantage that purchasers may consider in the case of a
sale of credit rights is that the accelerated loan
significantly (if not totally) limits the possibility of a
borrower becoming reformed without the consent of the creditor.
However, this is a remote risk in borrowers with a long history
of payment defaults.