Thursday 18 January 2018

AIB selling €675m debt in bid to clear books

Getty Images
Getty Images
Donal O'Donovan

Donal O'Donovan

AIB is the latest Irish bank to put a portion of its loan book up for sale, after launching a process to sell a €675m portfolio of commercial property loans.

The debt is understood to be backed by commercial property in Ireland, including Dublin office space.

The loans are being sold through US investment bank Morgan Stanley, according to a report in the 'Financial Time'.

The FT said the portfolio, known as Project Kildare, is being touted to global "vulture funds" and private equity firms.

The loans are some of the €24bn of AIB commercial property loans that were not transferred to NAMA.

Non-core assets

AIB along with the other banks is under pressure to sell such 'non-core' assets in order to clean up its balance sheets, to free up money for traditional lending to business and consumers.

Analysts say the latest crisis with banks in Spain, as well as tougher capital rules for all euro area banks means the window for such sales could be starting to narrow.

That's because as the tough new rules come into force banks from right across Europe will end up selling loans at the same time, all targeting a small pool of potential investors. That is likely to drive down prices.

In April UK owned Lloyds Bank put part of its Irish loan portfolio up for sale. Lloyds is selling €360m of Irish loans, a legacy of its takeover of Halifax Bank of Scotland.


Meanwhile sources at AIB say an internet frenzy over the repayment of a €2.25bn bond that fell due yesterday is based on misinformation.

Commentators on social networking sites including Twitter spoke out against the bond payment yesterday, but AIB sources said the controversial bond was not actually repaid at all. That's because the IOU had already been refinanced -- ie rolled over by bondholders -- in April.

The huge IOU was not covered by the State's banking guarantees, or even guaranteed by the state-owned bank.

Instead the IOU is a so-called 'covered bond' secured directly, or 'covered' by a share of AIB's financial assets.

If the bond was not repaid the bondholders would own the assets, rather than having a claim on AIB.

Irish Independent

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