Permanent TSB to sell €1.5bn in non-core commercial real estate loans

Permanent TSB has put two large portfolios of non-core commercial real estate loans up for sale. The loans have a combined face value of €1.5 billion and PTSB has engaged Morgan Stanley to handle the sales.

It is understood that Morgan Stanley began approaching potential bidders last week and plans to open a data room for interested parties before Christmas. This will allow them to access information about the assets involved in the sale.

The bank, which is 99.2 per cent owned by the State, hopes to complete the process by April.

The loans have been broken into two pools, called Leinster and Munster. The Leinster portfolio is thought to comprise loans with a face value of about €1 billion while Munster’s par value is about €500 million.

It is expected that the pools will be sold separately but PTSB would be willing to dispose of the loans to a single bidder if a suitable offer is tabled.

Third tranche

The books are collateralised mostly on commercial real estate and buy-to-let residential properties in Ireland, with a small percentage of the loans in the UK. A third tranche of loans, called Connacht, is expected to be put up for sale early in the new year.

This is the latest stage in PTSB’s ongoing deleveraging programme of non-core assets. In October, it announced the sale of its Springboard subprime mortgages unit to Mars Capital Ireland No 2 Ltd after a process that ran for more than three months.

Springboard was closed to new business in 2009. The mortgage loan book comprised gross assets of about €468 million, of which €350 million were non-performing.

It would be expected that the sale of the Leinster and Munster portfolios would be used to further reduce PTSB’s funding requirements in line with the ongoing restructuring of its balance sheet.

PTSB is currently in the process of formulating a plan to plug an €855 million capital deficit identified by the European Central Bank in stress tests earlier this year. This deficit was based on the institution's 2013 accounts.

Non-deal roadshows The bank has said more than 80 per cent of this figure has already been accounted for and it is currently engaged in so- called non-deal roadshows to drum up interest from external sources in providing about €200 million in return for an equity stake.

The bank, which still awaits approval for its restructuring plan from the European Commission, will be hoping to cash in on the strong appetite for Irish real estate assets at present. Recent research from estate agent CBRE suggested that €4 billion of asset sales would be completed this year along with up to €17 billion in loan sales.

These include disposals by Irish Bank Resolution Corporation, the National Asset Management Agency, UK banking group Lloyds and Ulster Bank, which is owned by Royal Bank of Scotland.

No comment on the sale process was available from PTSB.