Nearly €2 billion worth of loans offered by Halifax Bank of Scotland to 30 Irish developers during the height of the property boom have been sold for less than 10 cents in the euro by the Lloyds Banking Group, which took over the bank four years ago.
The sale of the €1.8 billion Project Lane portfolio of “particularly distressed” Irish property loans for €149 million by Lloyds to Risali Ltd, a company linked to Apollo Global Management which specialises in buying such assets.
The sell-off, which was first reported by property news website CoStar, is the latest illustration of Lloyds’s determination to get out of the Irish market entirely following the billions suffered by Bank of Scotland (Ireland) in the crash.
In a statement, Lloyds said: “The transaction is not expected to have a material impact on the group, due to the significant impairment provisions held against the portfolio, which are higher than the average across the Irish wholesale book because of the particularly distressed nature of these assets.”
Losses
In its interim results, Lloyds reported that it had made provision for losses of 66.8 per cent on its Irish wholesale loanbook, including the portfolio acquired by Apollo.
While the bank’s comment indicates a higher level of impairment on the Project Lane portfolio, it was not clear last night if the sale price was in line with Lloyds’s previous assessment of the worth of the property loans.
Discount
The Project Lane sale – which includes more than 100 properties, few, if any, of which are in Dublin – was handled for Lloyds by the head of Jones Lang Lasalle’s Dublin office, John Moran and Margaret Fleming.
The decision to sell at such a steep discount is testimony, firstly, to the poor quality of property included on the Project Lane list, rather than as a reflection of Lloyds’s judgment on the Irish economy, financial sources told The Irish Times last night.
Apollo Global Management describes itself as a “contrarian, value-oriented” investor with “significant” experience of dealing with distressed assets.
A much-smaller set of non-performing loans, the Project Pittsburgh portfolio, is to be sold to CarVal Investors and Centerbridge Partners for approximately €35 million – again for less than 10 cents in the euro.
Lloyds shrank its Irish loan book by £1.9 billion in the first half largely as a result of disposals, leaving it with £16.1 billion of wholesale, largely property-related Irish loans and £6.7 billion of retail loans – mostly mortgages.
The Irish loan book was cut by another £1.1 billion in the third quarter, Lloyds said in a November 1st trading update.
– (Additional reporting Reuters)
