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Citigroup securitizes Lone Star’s German NPL book

We can work it out.

To the surprise of no one, Citigroup (with Credit Suisse as joint bookrunner) has launched the first securitization of non-performing loans in Germany. The deal was backed by a pool of assets acquired by Lone Star Partners in late 2004, and has been expected since then. The past few years have witnessed a wave of non-performing loan sales by German banks as part of a massive balance-sheet clean-up exercise, and foreign buyers such as Lone Star have been only too keen to snap up these loans at sometimes pretty generous prices. Whether or not they choose to exit their investment via a securitization – if, indeed, such an option is even possible – has occupied many in the industry for a long time (see What's the buzz in German NPLs?, Euromoney November 2005).

Getting a portfolio ready from the original pool of loans sold to Lone Star in 2004 has been a time-consuming process. The fund purchased €3.6 billion-worth of loans from HypoReal Estate in late 2004. This first deal securitizes part of that portfolio (known as the Olympic portfolio). Lone Star took possession of the loans in March 2005, and since then there have been natural collections from the assets (cumulative net collections are running at 101.3%

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