Thursday 14 November 2019

AIB sells €850m in bad loans to Cerberus at 18pc discount

AIB said it would inform affected borrowers
AIB said it would inform affected borrowers "that their loans are being transferred, and to confirm existing legal and regulatory protections remain in place". Stock image

Shawn Pogatchnik

AIB has sold a 2,800-property loan portfolio to a unit of the vulture fund Cerberus Capital Management at an 18pc discount.

The sale of loans with a face value of €850m is expected to net AIB around €700m in the first half of 2020.

AIB, which is 71pc owned by the State, said the latest sale to the US fund would keep the bank "on track" to reach its goal of pruning non-performing loans to 5pc of its loan book by the end of the year.

Yesterday's move follows AIB's €1bn sale in April to Cerberus of a loan portfolio involving 5,000 mostly residential properties but also farmland - a fact that drove angry farmers to storm the bank's annual general meeting that month.

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Sinn Féin finance spokesman Pearse Doherty decried yesterday's sale as "a disgrace" and a new chapter in "the great Irish sell-off".

Mr Doherty said it was "striking" that AIB was offering a hefty "discount to a vulture fund but not to Irish families. If banks offered these discounts to Irish citizens, the housing crisis would look very different."

But the bank said removing non-performing loans from its books was a strategic necessity.

It noted that the process - largely achieved by renegotiating loan terms with individual customers, not by mass sell-offs to foreign funds - meant the bank had slashed its non-performing loans from €31bn in 2014 to €4.7bn, around 6pc of the total, by mid-2019.

"We continue to have circa 1,500 people working with customers who are in difficulty across the country," AIB said in a statement. "Our preference remains to provide solutions through customer engagement on a case-by-case basis."

The bank said the proceeds from the latest sale to Cerberus would be used, in part, to restructure non-performing loans that remain on its books.

Yesterday's sale involves about 1,000 customers with average debts of €900,000 on some 2,800 assets. These are mainly buy-to-let residences and a mix of other investment and commercial properties but does include owner-occupied homes and farm and development land.

AIB said about half of customers within the portfolio had not made payments for the past five years, and 75pc for at least two years. It said the portfolio generated €52m in 2018 losses.

The loans were bought by Cerberus unit Everyday Finance, one of the most active investors in Irish distressed debt since the property crash a decade ago.

AIB said it would inform affected borrowers "that their loans are being transferred, and to confirm existing legal and regulatory protections remain in place".

Irish Independent

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