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.”