Goldman Sachs and CarVal buy €2bn Irish portfolio from Lloyds

UK bank Lloyds has agreed the sale of a €2 billion portfolio of Irish buy-to-let residential and small commercial mortgages to Goldman Sachs and private equity group CarVal.

It is understood that management of this loan book will now switch from Certus to Pepper Asset Servicing. The portfolio comprises about 2,000 accounts.

Certus is an offshoot from the former Bank of Scotland (Ireland) business and has managed the Lloyds loan book since its exit from this market in 2010.

Last week, Certus informed staff of its plans to seek 195 redundancies here following the loss of business with Lloyds. It also recently lost the contract to manage a portfolio of 4,000 residential mortgages that was sold by Lloyds to US private equity group Lone Star, which then appointed HML to manage the book of loans. Those loans had a face value of about €1.1 billion.

It is understood that the loss of the €2 billion portfolio has been factored into Certus’s redundancy calculations.

The sale of this latest portfolio, codenamed Project Parasol, leaves Lloyds with a net exposure to Ireland of £6 billion, of which 80 per cent is believed to be performing loans.

When it closed Bank of Scotland (Ireland) and Halifax’s operations in Ireland, its exposure amounted to £19.7 billion. It has gradually sold off various non-performing loan books in the intervening period.

The purchase price is believed to have been slightly less than half of the face value of the underlying assets. No comment on the transaction was available from Lloyds, Goldman Sachs or CarVal.

One private equity executive specialising in distressed mortgage investments said the market for such deals was booming. Activity is being fuelled both by greater competition for deals between the mostly US funds that have arrived in the UK and by the greater willingness of banks to provide financing for such transactions.

The executive said the average purchase of an Irish distressed mortgage portfolio two years ago would have been financed with debt equivalent to half the value of the deal and cost 400-425 basis points over Libor, an inter- bank lending rate.

Now, he said it was possible to finance similar deals with 70 per cent debt, costing only 300-275 basis points over Libor. – (Additional reporting Financial Times)