Irish

Friday 1 August 2014

Banks tipped to sell €5bn property loans at huge discounts

Donal O'Donovan

Published 02/07/2013|04:00

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LENDERS, including the main banks, NAMA and IBRC, could dispose of property loans with a face value of €5bn in so-called portfolio sales this year.

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Sales could be even higher at €7bn in 2014, according to research by accountancy firm Deloitte. Add in €6bn of previously agreed disposals and that brings the total figure for loan sales to a staggering €18bn – however, most of the loans being traded are changing hands at huge discounts, including as much as 90pc off face value in one case.

Ireland is now one of the main EU markets for major loan sales thanks to an attractive legal system and sellers willing to make disposals at market prices, according to David Edmonds, global head of portfolio lead advisory services at Deloitte.

Sales are being driven by "deleveraging" by banks here as they sell assets even at a knock-down price in order to cut their own debts.

International banks such as Lloyds and Danske Bank that are working through books of "non-core assets" are also a significant factor, he said.

US private equity firms such as Lone Star and Kennedy Wilson remain the big buyers of the Irish assets.

ASSETS

EU buyers have yet to emerge as a significant force anywhere in the eurozone, but in some cases US bidders are backed at the fund level by euro-area investors, said Mr Edmonds.

NAMA entered the portfolio sales market this year, accepting an offer that will see it paid less than 25c in the euro for a loans portfolio backed by properties in Ireland, including Garda HQ on Dublin's Harcourt Street.

The loans have a face value of €810m but are being sold for €200m. Under the terms of the deal, NAMA retains a 20pc stake in the portfolio of property loans.

State-owned NAMA is understood to have agreed the terms to sell the portfolio dubbed Project Aspen to a consortium made up of US private-equity giant Starwood Capital, Ireland's Key Capital and London-based Catalyst Capital.

Such sales have become a major feature of the financial landscape since the banking crisis as lenders have hived off masses of loans, regarded as assets by banks. The biggest sale seen to date was by Anglo Irish Bank, which off-loaded its €6.9bn of US loans in a single deal back in 2011. AIB has also been a significant seller.

The deal that grabbed most headlines was Lloyds Group's sale of a "€1.8bn" book of Irish loans for less than 10 cent in the euro last December, which must have sent shivers up the spines of executives at the other banks.

Irish Independent

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