Cerberus and Kennedy Wilson are among those to make the shortlist for latest big non-performing loan deal, as Lloyds offers €400m Irish portfolio
Lloyds Banking Group has drawn up a shortlist of buyers for the next large non-performing loan portfolio likely to be sold. US firms Cerberus and Kennedy Wilson are thought to have gone through to the second round of bidding for a €400m portfolio of Irish loans being offered by Lloyds’ subsidiary Bank of Scotland (Ireland).
Deutsche Bank, Forum Partners and Colony Capital are also thought to have bid for the ‘Project Prince’ assets, but Lone Star, which has bought large NPL portfolios from three different banks in the past six months, did not bid this time. Nor did TPG with its Irish partner, Green Property. Deloitte is advising Lloyds.
Kennedy Wilson has capital to invest from several sources, including a joint venture with Canadian financial group Fairfax. The US investor and asset manager, which bought £1.33bn of Bank of Ireland loans late last year, is thought to be in discussions with another very large investor that wants to commit more than £1bn to the manager to invest in European assets and loans.
Cerberus this month recapitalised Speymill Deutsche Immobilien Company (SDIC), which owns 22,000 German multi-family housing properties. The private equity manager refinanced €985m of non-performing debt by injecting equity and subordinated debt capital, and refinancing with lenders NIBC, Nord LB and HSH Nordbank.
Lloyds’ Irish portfolio is the first new NPL stock to come onto the market in the UK and Ireland after a lull of several months. However, investors expect banks to bring more loan portfolios to the market later this year.
JPMorgan Chase is strongly rumoured to be advising Lloyds on the sale of a second package of UK loans, following the sale of the Project Royal portfolio to Lone Star last month. Meanwhile, Allied Irish Bank has appointed Morgan Stanley and Citigroup to advise on the sale of two real estate loan books, one in the UK and one in Ireland.
In Spain, where the government recently instructed the country’s banks to raise their provisions on real estate loans and requested an independent audit of their balance sheets, BBVA is preparing to sell a commercial portfolio with a face value of about €1bn.
Buying Irish loans is increasingly seen as a recovery play by investors and Project Prince will test the appetite for sales, as well as views on pricing. Lloyds is thought to have already written down the value of the loans to less than a third. However, since first-round bids came in on Lloyds’ Irish loans, market sentiment has taken a dive, with the turmoil in Greece causing concern about the knock-on effects across Europe.
“Buying into illiquid pools in this environment would be only for the brave-hearted,” said one NPL loan investor. Real Estate Capital calculates that Europe-based banks have sold loans with a face value of more than £20bn since January 2011 in 25 transactions. This is still only a small fraction of the problem loans sitting on banks’ books, as the latest De Montfort lending report makes clear.