Cerberus, CarVal and Cabot join forces for AIB problem loans bid

`Project Sycamore’ portfolio to be mainly made up of deep-in-default commercial property loans

AIB has drawn a joint bid from Cerberus, CarVal and Cabot for €700 million-plus portfolio of distressed loans issued before the property crash. Photograph: Aidan Crawley/Bloomberg

US distressed loans investment groups Cerberus and CarVal have joined forces with debt-collection firm Cabot to bid for a mixed portfolio of AIB non-performing loans (NPLs) that had an original value of more than €700 million, according to sources.

The portfolio, dubbed Project Sycamore, as expected is mainly made up of deep-in-default commercial property loans issued before the property crash in 2008 as well as unsecured borrowings, the sources said.

It is understood that Cerberus, Carval and Cabot are the final mix for the loans along with another bidder, the identity of which could not be confirmed. A deal is expected to be announced in the coming weeks, at a deep discount to the book’s par value.

It is also likely that the original size of the portfolio will have declined from when it was being put together late last year in preparation for sale, as some borrowers strike loan-restructuring deals or refinancing borrowings elsewhere, according to industry sources.

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A spokesman for AIB declined to comment on the sale. However, he said that the bank’s NPLs, having fallen from a peak of €31 billion in 2013 to €3 billion, or 5.1 per cent of gross loans, as the end of March, remain “elevated”. The bank has targeted reducing the ratio to 3 per cent in the medium term, in line with European norms.

“For customers in difficulty, our focus has been to put in place sustainable solutions to help customers in arrears to get back on track. AIB continues to support customers through a comprehensive range of forbearance solutions and we have done so in over 145,000 cases,” he said.

Efforts to secure comment from Cerberus, CarVal and Cabot were unsuccessful.

While AIB has been an active seller of portfolios of long-standing problem loans in recent years to lower its NPLs level, the ratio is also set to improve as a result of its planned acquisition of €9.9 billion of performing tracker mortgages and corporate and commercial loans from Ulster Bank as the latter advanced a plan to exit the Irish market. A deal on the tracker loans, which are expected to amount to €5.7 billion of mortgages by the time it is completed later this year, was signed on Wednesday.

Last October, AIB agreed to sell €400 million of problem mortgages, known as Project Bay, to a consortium involving US-based Ellington Financial and Mars Capital Finance Ireland. Morgan Stanley provided finance for the deal.

In February 2021, the State’s largest mortgage lender agreed to sell a portfolio of mainly troubled home loans to US investment group Apollo for a discounted price of €400 million, with Mars Capital Finance Ireland contracted to service the loans.

A month earlier, the bank sold a portfolio of 620 owner-occupier mortgages, originally worth €150 million, to an “ethical” investment consortium, comprising Everyday Finance, Home for Life, Arizun Asset Management (Ireland) and LCM Partners, that is focused on mortgage-to-rent for borrowers.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times