RBS plans Project Isobel loan CMBS

Bank has yet to decide whether to hold bonds in securitised loan or sell them in public market

Royal Bank of Scotland is to securitise the £550m loan it made against the Project Isobel portfolio, nominally valued at £1.36bn, in the next two weeks. Sources said the process of securitising the loan is nearly complete and that the deal has been rated.

However, the bonds are unlikely to be sold in the public market, at least initially. Instead, the bank will carry out pre-marketing to assess potential pricing, before deciding whether to try to sell the bonds or to hold them.

The securitisation was arranged by a group in the bank’s non-core real estate team, led by managing director Rajesh Sivaraman. Rory Cullinan, head of the non-core group, has stressed that RBS does not need to agree fire sales of assets.

The bank said its strategy for Project Isobel was to structure both its equity and debt in the loan portfolio to be prepared as far as possible for sales at the best possible time. RBS transferred the loans to a fund in which it has a 75% equity stake. Blackstone Group bought the other 25% at around a 30% discount to nominal value.

RBS was unable to source what it considered competitively priced “loan-on-loan” debt in the market, so made the three-year term loan itself, at around 600bps over Libor. Taking Blackstone’s discount as a guide to value, the £550m of debt has a loan-to-value ratio of just under 60%. The deal was closed six months ago.

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