Tuesday 20 February 2018

AIB lines up Redwood sale but no Danske Bank loan bid

Gretchen Friemann

AIB is expected to pull the trigger on a multi-billion sale of soured loans in November as the State-backed lender intensifies efforts to purge its balance sheet of non-performing assets amid an EU-wide crackdown on banks with persistently high non-performing assets.

The Irish Independent has established the bank, which is over 70pc owned by the taxpayer, will not bid for Danske Bank's sought-after €2bn retail book of mostly good mortgages.

The Danish bank enlisted Bank of America Merrill Lynch to sell the portfolio of performing loans earlier this year.

It is understood AIB cast an eye over the book but did not submit a bid for the portfolio, which contains a large volume of tracker mortgages.

As this newspaper reported last week, final bids for the Danske book are due on September 25.

US funds giant Pimco and Bank of Ireland remain in contention along with two other bidders. AIB pledged to swiftly reduce its stack of NPLs prior to its return to the Dublin and London stock exchanges in June, when the Government offloaded €3.4bn shares in the bank.

Project Redwood, as this latest portfolio of soured loans has been dubbed, has been in the works for some time.

The bank drafted in advisers KPMG back in April. The accountancy firm also handled the Project Cypress portfolio, which contained toxic loans with a face value of €400m.

The buy-to-let mortgages were sold to Goldman Sachs for half that sum.

According to sources the bulk of the Project Redwood loans are tied to investment properties.

Its long-awaited launch is likely to draw a wide field of bidders, including Deutsche, Goldman Sachs, CorVal and Cerberus, although there are some question marks over Lone Star's appetite for more deals, with industry sources claiming the US buyout fund has shifted its focus to other European markets over the past year.

However, distressed loan sales in Ireland have been thin on the ground in 2017 compared to previous years.

While the Danske book marks the largest portfolio sale so far this year, the loans are performing and are of interest to institutional players rather than the distressed debt funds that have become household names here since the crash.

The face value of Project Redwood's is expected to surpass €2bn.

Its launch later this year comes as the ECB intensifies pressure on the region's banks to reduce crisis-era NPLs amid mounting anxiety at the threat posed to the eurozone's economy by some €1trn of toxic loans.

The rush to improve balance sheets has spurred a spate of large-scale loan sales in Italy, Spain and Portugal in recent months.

While Ireland's total NPL exposure remains behind these countries it still stands above the EU average, as the EU Commission made clear in a post-bailout surveillance report in March.

While the Commission noted that Irish banks have substantially reduced NPLs since the crash, it said the stock "remains high and shows signs of stickiness".

Permanent TSB, which holds the highest volume of NPLs among the Irish lenders, is likely to follow AIB and launch a €1.25bn auction of buy-to-let mortgages either before Christmas or in the first quarter of 2018.

AIB declined to comment.

Irish Independent

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