Business Irish

Thursday 24 May 2018

AIB calls for final bids on Redwood as shares spike on back of tax ruling

AIB CEO Bernard Byrne
AIB CEO Bernard Byrne

Gretchen Friemann

Remaining bidders on AIB's €3.7bn Redwood loan portfolio sale are racing to submit final bids by the end of April as the bank's largest sell-off of non-performing loans nears a conclusion.

News of Redwood's looming sale comes as the State-backed bank's shares leapt by over 3pc after Finance Minister Paschal Donohoe vowed not to change how old losses reduce banks' tax bills.

His comments ended uncertainty on the issue, delivering a share price fillip to the sector that has been under siege over the past fortnight amid concerns lawmakers would impose a 10-year limit on banks' ability to write off historic losses against tax.

However, Mr Donohoe shot down any change to the existing rules, arguing a different treatment of deferred tax assets may hurt the Government's ability to maximise its returns on its bank holdings. The State holds a 71pc interest in AIB and 14pc of Bank of Ireland.

Investors are likely to deliver an equally warm response to the successful completion of Redwood.

AIB's relatively steep level of soured exposures, which fell by €3.9bn to €10.2bn at the end of the 2017 financial year but still account for 16pc of the total loan book, remain three times higher than 'normalised' European levels.

According to sources, the deal size of Redwood has reduced slightly but, as reported by this newspaper previously, the book is expected to change hands at close to €2bn - a substantial discount to the portfolio's gross value of about €3.7bn.

While a number of borrowers have refinanced loans out of Redwood over the past year, it is understood AIB has limited any further exits as the process reaches the concluding stages.

At a recent appearance before the Oireachtas Public Accounts Committee, AIB executives declined to even acknowledge the existence of Redwood.

The loan sale, which excludes owner-occupier mortgages, is well known among investment banking circles in London as potential lenders to the remaining bidders - Lone Star, Cerberus and Goldman Sachs - sift through the data ahead of final offers.

AIB's stance on the regulatory status of bidders also remains unclear. The bank has signalled its preference for a regulated buyer, and is thought to be keen on a sale that best insulates the bank from a political backlash.

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