Low bids prompt Allied Irish to axe Project Pivot loan sale

Bank scraps sale of £383m bad loan portfolio at last minute, as round-two bids fail to meet expectations, and will now sell a reduced loans package

Allied Irish Bank has gone back to square one with the sale of the £383m portfolio of ‘Project Pivot’ UK loans, because it did not get the price it wanted.

Project Pivot is understood to have been canned at the last minute, after AIB, advised by Citigroup, received final-round bids in a two-stage process.

Kennedy Wilson with Deutsche Bank, Cerberus and Telereal Trillium are thought to have made final-round offers for the portfolio.

The bank and its adviser will now try to sell a much reduced portfolio with a face value of nearer £200m. The original package comprised 108 loans secured on secondary properties across the UK, and was expected to sell for a discount to face value of 50%-60%.

One person involved in the deal said: “It is unusual to get to the second-round stage and then decide not to go ahead.” The sale was launched last June.

About two-thirds of the loans in the original portfolio will be past maturity by the end of the year and over a third were due last year. Some of them are syndicated, making resolution more complicated. The largest individual loan is £31m, backed by 35 bars and nightclubs in the north- east and north-west, while the second largest is £30m, secured on 14 hotels.

A long list of companies submitted first-round bids, including Blackstone, Lone Star, Starwood Capital, Goldman Sachs Whitehall Funds, Forum Partners, Fortress, Apollo, PIMCO and Chenavari.

However, Allied Irish has made progress with the sale of its €650m Project Kildare Irish non-performing loan portfolio, which is under offer to Lone Star at a near 60% discount to par.

Lone Star’s bid was favoured over two others, from Goldman Sach’s Special Situations Fund and Kennedy Wilson, bidding on this occasion with Varde Partners.

Morgan Stanley advised on the sale, which was launched at the same time as Pivot. Kildare comprises mainly Irish assets in and around Dublin, with 10%-20% in the UK.

It is the second Irish distressed loan portfolio to be sold: in June, Kennedy Wilson and Deutsche Bank bought the 150, €360m-nominally valued loans in Lloyds Banking Group’s Project Prince for €61m.

Lone Star has been the most successful buyer of European distressed loan portfolios this cycle. Kildare would be its fourth deal within a year, after it bought Lloyds’ Project Royal last December; a €200m nominally-valued Société Générale loan package in April; and €1.4bn-worth of loans from the Bundesbank, in January and April.

It is shortlisted against two others to buy all or parts of Lloyds’ €2bn Project Pittlane – another severely distressed Irish loan book, split into two ‘Lane’ and ‘Pittsburgh’ sub pools.

Lone Star is in the running for Project Lane, having bid on both Pittsburgh and Lane in the first round. Kennedy Wilson is thought to be bidding on the entire portfolio, which, as a whole, could be sold for ten or fifteen cents in the euro. The third bidder is going after Pittsburgh. Cerberus has been knocked out of the process, which is being handled by Deloitte.