Greece in prime location on global NPL map-Ashurst
Greece is holding the attention of the world’s non performing loans (NPL) market with investors drawn mostly to hospitality backed loans, said London-based law firm Ashurst.
With Greece having the largest non-performing loan ratio in the Eurozone, the lack of progress made in developing an active market in NPL resolution may be about to turn a corner according to a new report from the law company.
Mark Edwards, head of Ashurst's NPL resolution practice, said that the combination of European interest rates remaining at historic sustained lows and deep pools of investor capital available to be deployed across Europe is prompting investors to look to new markets for opportunity.
"Greece stands out as the target investment country for the next 12 months, with Italy coming in second at just over 50% and Cyprus, Spain and Portugal some way behind. Investor enthusiasm in Greece is underpinned by an understanding of the continued challenges in that market," said Edwards.
Hospitality-related loans, were singled out as the asset class of most interest to investors, according to the report, with 90% of respondents citing these loans as one of their top two choices for investment, followed by commercial real estate backed loans (50%).
On the other hand, from a seller's perspective, large commercial credits are the primary focus of the Greek banks, with 50% regarding such assets as one of their biggest NPL challenges.
Despite a range of legal reforms which will help create an effective NPL market having now largely been implemented, Greek banks, investors and local servicers still see obstacles to an active Greek NPL market:
"A combination of local legal constraints, insufficient loss provisioning and wider macro-economic uncertainty has, to date, contributed to slower restructuring and NPL resolution activity levels compared to certain Southern European countries with similar NPL challenges. It now seems that the tide is turning," said restructuring and special situations partner, Olga Galazoula.
With Greece currently holding the attention of the world's NPL investor community, in order to capitalise on this and secure its status as a key NPL investment market, the report stressed the importance sellers need quickly to establish themselves as trusted transaction counterparties and data quality needs to be a primary focus for sellers bringing assets to market.