Prepared by Ajay Rawal, Partner, EY
  • The NPL market came to a standstill in March but deal flow has restarted.
  • Deal-flow does not include completed deals and therefore, it will be interesting to see what closes in Greece, Spain and Portugal before the end of the year.
  • Unlevered IRRs have fallen to 6-7% with selling banks and investment banks providing high levels of leverage.
  • Post COVID the bid/ask spread has widened with stability, performance data and provisions needed to facilitate market activity.
  • Government stimulus lending is creating a new class of lending which may behave differently in terms of default rates.
  • To date, performance is better than expected with more customers restarting payments.
  • Starting to see a new shape as moratoriums and forbearance unwinds. Court processes are showing delays.
  • NPL rates likely to grow substantially, with the ECB forecasting up to €1.4trn. Regional AMCs, a network of AMCs, a European data hub and greater use of trading platforms are possible solutions.
  • Investors are being more selective with some focused on single-name credits.
  • Hospitality and real estate continue to be of particular interest to investors.


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