IlliquidX eyes Spain’s distressed debt market for investment opportunities

The market of illiquid assets in Spain is growing at a fast pace, and investors hold the view that Spain’s financial situation is set to improve with significant recovery potential for distressed assets, according to distressed debt pricing and trading platform IlliquidX.

In order to tap into this growing business, the company appointed today Ignacio Muñoz-Alonso to its senior advisory board, expanding its reach from London to Spain.

Muñoz-Alonso is chief executive at investment management company Addax Capital and has previously been head of corporate and investment banking for Europe Middle East and Africa at BBVA.

“We believe the Spanish distressed debt market has opened an unusual window of opportunity where much improved investor sentiment is meeting the absolute requirement for local banks to offload large portions of distressed debt at deeply discounted prices which carry significant attractions for medium-term opportunistic investors who are long of cash. We anticipate the market for Spanish distressed assets becoming more liquid,” said Celestino Amore, chief executive and co-founder of IlliquidX.

Expectations are confirmed by the decision by largest Spanish banks to sell their distressed assets.

“Any euro we can get for our distressed assets are profit. We are not in a hurry and we are waiting for bids,” said Francisco Gonzalez, chairman and chief executive at BBVA.

IlliquidX confirmed that bids for such distressed assets were very low one year ago, but that prices are continuing to increase as a result of a less pessimistic outlook on the stability of the Spanish banking system.

In a recent evaluation of the Spanish banking sector, Oliver Wyman and Roland Burger found that estimated Spanish banking capital needs were significantly lower than the credit backdrop proposed by the Spanish authorities and the Eurogroup.

The studies published estimated a bail-out requirement between of a minimum €51bn and a maximum of €62bn in contrast to the €100bn negotiated.

Moreover, IlliquidX added, the proposed bail-out of Spain’s banking system allows the country to offload the burden of bank recapitalization onto the Eurozone, inducing an increase in bank credit ratings and ultimately making sovereign debt more appealing to private investors.

“This, in turn, has allowed Spanish debt to be slightly less than 6% of total assets, a figure that should not give cause for great concern, given this was the same debt/assets ratio present in the Spanish market 10 years ago,” the company said.

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