First Bancorp Agrees to Sell Nonperforming Commercial Loans

First Bancorp, the holding company for FirstBank Puerto Rico, said that the financial institution has reached three separate agreements to sell a total of $532 million of unpaid principal balance in classified and nonperforming commercial loans.

The overall purchase price to acquire these nonperforming loans was $201 million.

On March 28, FirstBank, based in San Juan, completed the sale of a portfolio on nonperforming and classified commercial real estate loans, construction loans, and commercial loans with an unpaid principal balance of $378 million to Lone Star Funds. The purchase price for the assets is equal to 31.8% of the unpaid principal balance of the loans, or $120 million in an all cash transaction.

Additionally, the Bank said it reached two agreements—a definitive agreement and a letter of intent—with other third-party investors to sell an additional $154 million of unpaid principal balance in nonperforming commercial and construction loans. The combined sales price for these deals is $81 million, FirstBank said.

The transactions are expected to be finalized in the second quarter this year.

At the completion of these transactions, FirstBank will reduce its nonperforming assets by approximately 23%, or $282 million. Also, the Bank will see a pretax loss net of reserves of approximately $65 million due to this sale.

“Through aggressive remediation, these transactions are a positive step as we work toward achieving our goal of substantially reducing problem assets. While there is an impact to earnings, these transactions greatly improve our credit risk profile,” said Aurelio Alemán, president and CEO of First Bancorp. “In addition to improving our risk profile and reducing expenses, these transactions will free up time for management to focus on growth opportunities.”