Ulster Bank loses out on £71m in loan book sell-off

ULSTER Bank has lost out on €80.7m (£71.2m) in deferred consideration on the sale of a €1.35bn (£1.2bn) troubled loan book to US vulture fund Cerberus.

The bank was unable to secure the deferred consideration following the expiry of a deadline to resolve deficiencies in collateral attached to loans that were bought in 2014 by a Cerberus vehicle called Promontoria (Aran). The deferred consideration would have been paid in 2016.

In all, €252.1m (£222m) of the €1.4bn (£1.2bn) sale price took the form of deferred consideration.

It’s understood Northern Ireland loans were part of the tranche.

While the €80.7m not paid to Ulster Bank is relatively small in the context of €1.4bn (£1.2bn) in loans, it is significant considering the bank’s operating profits tumbled in 2016 to €24m (£21m) from €338m (£298m) a year ear- lier, mostly because of the tracker scandal. Non-payment of the deferred consideration is revealed in 2016 accounts just filed at the Companies Registration Office for Promontoria (Aran).

Cerberus paid €1.4bn (£1.2bn) for the non-performing Ulster Bank loans that originally had a face value of as much as €6bn (£5.3m).

They were secured on assets located in the Republic, NI and the rest of the UK.

“Due to deficiencies in the underlying collateral at the time of the loan sale, it was agreed that a portion of the purchase price agreed by Cerberus would be withheld until Ulster Bank satisfactorily resolved any deficiencies in the collateral,” the Promontoria (Aran) accounts note.

“... the remediation was completed in February 2016, and resulted in €80.7m (£71.2m) of the deferred purchase price not being paid to Ulster Bank, which resulted in a gain in the accounts,” Promontoria (Aran) noted.

Ulster Bank could not be reached for comment.