AIB to finance Santander deal

AIB Corporate Banking will provide more than €700 million in senior debt to entrepreneur Hugh Osmond for his acquisition of 1,173 Santander bank branches in Spain.

This deal closed late last week and is believed to be the biggest property transaction in Europe this year.

It signifies a shift by AIB Corporate Banking towards funding property deals on mainland Europe as the Irish market slows. AIB Corporate Banking is believed to be one of two lead arrangers providing €1.6 billion in senior debt to Sun Capital Partners, an investment group controlled by Mr Osmond, for the Santander deal.

Informed sources said France's BNP is the other bank involved. Mr Osmond is spending €2.1 billion to acquire the network of Santander bank branches.

The properties are understood to produce annual rents of some €101 million, giving the investors a 5 per cent yield on the deal. The properties will be leased back to the Spanish bank.

Santander is trying to sell €4 billion worth of property assets in order to fund its joint bid for the Dutch bank ABN Amro. Mr Osmond is a senior director of Pearl Assurance in the UK and made his name running PizzaExpress and Punch Taverns.

No comment was available from AIB Corporate Banking.

Headed by Jerry McCrohan, corporate banking is a division of AIB's capital market's arm. It has offices in Ireland, Britain, France, Germany, Sydney and north America.

In AIB's interim results, Capital Markets reported profit before tax of €333 million, a rise of 3 per cent. Some 70 per cent of its profits are generated by AIB Corporate Banking.

The corporate banking arm posted an increase in its operating profit before provisions of 24 per cent while its pre-tax profit rose by 12 per cent. Lending expanded by 18 per cent.

Recent deals involving AIB Corporate Banking include the acquisition by the Dublin-based Prem Group of a portfolio of hotels in Belgium and France.

The total value of the portfolio was €130 million, with debt funding provided by AIB Corporate Banking.

It also provided €114 million in debt for the acquisition of Eircom's portfolio of masts, which were acquired by a consortium led by Threefold Project Management.