Race to buy up €3.7bn of prob­lem loans at AIB

Irish Independent - Business Week - - BUSINESSWEEK - Gretchen Frie­mann

US pri­vate eq­uity gi­ant Bain Cap­i­tal is ex­pected to com­pete for AIB’s multi-bil­lion euro of non-per­form­ing loans when the bank fires the start­ing gun on the much-an­tic­i­pated Project Redwood deal later this month.

AIB has spent months as­sem­bling some €3.76bn worth of non-per­form­ing ex­po­sures as it at­tempts to dras­ti­cally re­duce its bur­den of bad debts amid wan­ing tol­er­ance for the prob­lem from the Euro­pean Cen­tral Bank.

Bos­ton-based Bain, which backs Broad­haven, the Dublin-based al­ter­na­tive fi­nancier, is the lat­est buy­out firm to be linked to the loom­ing sale, with Oak­tree, Cer­berus, CorVal, Deutsche and Gold­man Sachs all tipped to en­ter the race.

There have been con­flict­ing sig­nals, how­ever, about Lone Star’s in­ter­est as the dis­tressed debt firm is scal­ing back the num­ber of staff ser­vic­ing its Ir­ish ex­po­sures – a move widely in­ter­preted as an in­di­ca­tion of its dwin­dling de­mand for lo­cal non-per­form­ing loans.

The an­tic­i­pated launch of Project Redwood comes as in­vestor ap­petite for soured debts in Eu­rope re­mains ro­bust as lenders rush to off­load stacks of bad loans af­ter the ECB sig­nalled it was pre­pared to adopt a tougher ap­proach to force banks to con­front the is­sue.

Last month Bain, in part­ner­ship with Ocean­wood, a Lon­don-based hedge fund, snapped up €600m of non-per­form­ing as­sets from the Span­ish re­gional lender, Liber­bank for a re­ported 42c in the euro. AIB is ex­pected to suf­fer a rel­a­tively hefty dis­count on Project Redwood, which is pre­dicted to sell for close to €2bn, a dis­count to face value of 46pc.

The port­fo­lio is a mix of im­paired loans, in­clud­ing buyto-let mort­gages, SME loans, and re­volv­ing fa­cil­i­ties as well as com­mer­cial real es­tate de­vel­op­ments, con­struc­tion loans and debts tied to land and res­i­den­tial de­vel­op­ments.

A draft doc­u­ment out­lin­ing all the loans ear­marked for sale, and seen by the Ir­ish In­de­pen­dent, shows the bank is con­sid­er­ing sell­ing some 2,712 buy-to-let mort­gages that carry a gross value of €702m.

A to­tal of 1242 com­mer­cial in­vest­ment loans with a face value of €941m are likely to be in­cluded as are 600 im­paired loans linked to land, worth €693m.

The doc­u­ment showed 2,762 re­volv­ing fa­cil­i­ties could be sold, with the gross value of these set at €97m. A to­tal of 674 res­i­den­tial in­vest­ment loans, worth €350m may be shunted into Project Redwood, along with 430 res­i­den­tial de­vel­op­ment loans, al­lo­cated a gross value of €371m.

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