Wells Fargo is providing loan-on-loan finance for Lone Star’s purchase of non-performing loans from Eurohypo. Lone Star is in exclusivity to buy one third of Eurohypo’s £4bn UK book – about £1.3bn by face value – to which it is applying leverage.
The loans are “not that badly performing” said an investor, and the discount Lone Star is paying is less steep than the almost 40% discount at which Cerberus acquired Lloyds’ Project Thames portfolio this month.
Wells Fargo itself is buying the performing part of Eurohypo’s book, representing two thirds of the portfolio. The US bank moved into UK property lending 18 months ago because it saw better returns on lending in Europe than in its domestic market and many of its US customers have been targeting Europe.
Barclays Capital is advising Eurohypo’s parent, Commerzbank, and the sale is expected to complete in July. Cerberus paid Lloyds £325m for Project Thames – a batch of loans nominally worth £527m underpinned by a portfolio of 180 secondary UK properties. Nomura is providing 60% loan-to-cost finance.