Lloyds offloads bonds to help slash property exposure

Lloyds Banking Group has made more big reductions to its UK real estate exposure in the past two months by quietly selling CMBS and RMBS senior- tranche bonds with a par value of over £1bn, sources said.

The bank is pursuing every avenue to cut its property book, including portfolio loan sales. “It completed the sales at prices implying average discount margins of 270-280bps,” one ABS investor said.

“It got good prices because spreads have widened to a 300bps discount margin due to the problems with Greece.” The tranches sold in individual deals ranged from £20m to £100m. “It typically sold one ‘list’ per week and sometimes two,” another investor said.

One of the biggest CMBS positions sold was around £100m of Opera Finance bonds secured on Capital Shopping Centres’ Gateshead MetroCentre.

Others included Opera Finance CSC 3, secured on CSC shopping centres in Braehead, Glasgow and the Harlequin, Watford; Epic Caspar, secured on a UK portfolio managed by the eponymous Henderson fund, which is being wound-up and sold; and a Sainsbury’s CMBS.

Another was from UNITE’s Student Accommodation Fund’s £285m securitisation. Lloyds has other exposure to USAF after recently extending a balance- sheet facility for the fund. Corporate lending rather than investment lending is now its preferred business, managing director of corporate lending Lynda Shillaw said.

A spokeswoman said Lloyds was selling its CMBS and RMBS secondary portfolio as part of a range of deleveraging strategies. “These sales are to do with running off the non-strategic portfolio,” she said. “We don’t break down what we deleveraged where, but last year we reduced the book by £53bn.”