Tuesday 17 July 2018

Race to buy up €3.7bn of problem loans at AIB

AIB has spent months assembling some €3.76bn worth of non-performing exposures as it attempts to drastically reduce its burden of bad debts amid waning tolerance for the problem from the European Central Bank.
AIB has spent months assembling some €3.76bn worth of non-performing exposures as it attempts to drastically reduce its burden of bad debts amid waning tolerance for the problem from the European Central Bank.

Gretchen Friemann

US private equity giant Bain Capital is expected to compete for AIB's multi-billion euro of non-performing loans when the bank fires the starting gun on the much-anticipated Project Redwood deal later this month.

AIB has spent months assembling some €3.76bn worth of non-performing exposures as it attempts to drastically reduce its burden of bad debts amid waning tolerance for the problem from the European Central Bank.

Boston-based Bain, which backs Broadhaven, the Dublin-based alternative financier, is the latest buyout firm to be linked to the looming sale, with Oaktree, Cerberus, CorVal, Deutsche and Goldman Sachs all tipped to enter the race.

There have been conflicting signals, however, about Lone Star's interest as the distressed debt firm is scaling back the number of staff servicing its Irish exposures - a move widely interpreted as an indication of its dwindling demand for local non-performing loans.

The anticipated launch of Project Redwood comes as investor appetite for soured debts in Europe remains robust as lenders rush to offload stacks of bad loans after the ECB signalled it was prepared to adopt a tougher approach to force banks to confront the issue.

Last month Bain, in partnership with Oceanwood, a London-based hedge fund, snapped up €600m of non-performing assets from the Spanish regional lender, Liberbank for a reported 42c in the euro. AIB is expected to suffer a relatively hefty discount on Project Redwood, which is predicted to sell for close to €2bn, a discount to face value of 46pc.

The portfolio is a mix of impaired loans, including buy-to-let mortgages, SME loans, and revolving facilities as well as commercial real estate developments, construction loans and debts tied to land and residential developments.

A draft document outlining all the loans earmarked for sale, and seen by the Irish Independent, shows the bank is considering selling some 2,712 buy-to-let mortgages that carry a gross value of €702m.

A total of 1242 commercial investment loans with a face value of €941m are likely to be included as are 600 impaired loans linked to land, worth €693m.

The document showed 2,762 revolving facilities could be sold, with the gross value of these set at €97m. A total of 674 residential investment loans, worth €350m may be shunted into Project Redwood, along with 430 residential development loans, allocated a gross value of €371m.

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