The Blackstone Saga:
With one of the largest bond defaults of this year, are we headed into a full-blown recession?
If big fintech is burning, could it lead to yet another Global Financial Crisis?
Probably not. Cause here is the full picture:
Property values are dropping in Europe as rising interest rates put off buyers until a clearer picture of how far rates will rise emerges. That’s led to wide gaps between bids and offers, crimping deal volumes and putting pressure on owners with loans that are maturing. About a third of all loans in commercial-mortgage-backed securities maturing in 2023 and 2024 face high refinancing risks, according to a study published by Scope Ratings in January.
Concerns about how far values could fall are encouraging lenders to push for sales more quickly, while borrowers would prefer more time to seek higher offers for their properties. The drop in prices has so far not led to widespread credit losses, so some creditors are betting that rapid sales can still ensure the debt is fully repaid.
Blackstone, the global asset management giant, has defaulted on part of a €531M bond backed by a commercial portfolio owned by Finnish property investment firm Sponda, which it acquired in 2017. Even though the private equity firm has repaid almost half of that figure, closer to €300M. Currently, €297.1M of the loan remains outstanding, secured against 45 properties in Finland, mainly offices and stores.
Blackstone earlier sought an extension from holders of the securitized notes so that it could sell the assets and repay the debt, but the commercial mortgage-backed security has since matured without being repaid. The asset management giant and prolific real estate investor sought an extension from the bondholders to repay the debt, but they voted against it, according to a report citing people familiar with the matter.
The portfolio represents approximately 10%-15% of Sponda's overall portfolio. The asset sale process was impacted by COVID-related disruptions, the Ukraine war, and wider market volatility said a source familiar with the situation. The source also mentioned that the rest of the portfolio had been refinanced recently.
In response to the default, shares of Blackstone fell 1.6%. However, the company expressed confidence in the core Sponda portfolio and its management team.
Cheers!
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