(Bloomberg) -- Banco Sabadell SA, the Spanish lender seeking to fend off a takeover from a rival, is reaching out to potential investors to offload credit risk linked to a portfolio of about $1.3 billion of loans.
The plan for a significant risk transfer, arranged by UniCredit SpA, is linked to a pool of project financing and corporate loans originated by its business in Miami, said people with knowledge of the matter, who asked not to be named on private talks. Sabadell and UniCredit representatives declined to comment.
Sabadell is assessing appetite for the deal just as Chief Executive Officer Cesar Gonzalez-Bueno seeks to convince shareholders that a standalone future for the lender will earn them more than a takeover by Banco Bilbao Vizcaya Argentaria SA. An increased pledge to return money to investors is a key plank of his strategy.
With SRTs, investors can receive yields that frequently top 10%. Banks offload the risk of loan portfolios, holding on to the assets but paying investment firms to share any potential future losses. Usually, a bank would obtain default protection for as much as 15%.
That allows the lender to manage regulatory capital constraints and helps them provide new lending in an era of stringent regulations. It also reduces the need for moves that hurt equity investors, such as issuing new stock or reducing shareholder payouts.
Sabadell sold investors a synthetic securitization earlier this year, tied to a portfolio of mostly renewable energy project financing, according to a statement in June.
Demand for SRTs is growing as hedge funds and other institutional investors seek high-yield assets to diversify portfolios. BNP Paribas SA and Deutsche Bank AG are among lenders that increased the size of SRT deals in recent weeks to keep up with demand.
--With assistance from Sonia Sirletti.
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