AIB sells problem loans portfolio to Cerberus-led group for €400m

Loan book, with reported original value of more than €700 million, is about nine years in default on average

AIB chief executive Colin Hunt said the loan sale was an "important milestone" for the bank. Photograph Nick Bradshaw for The Irish Times

AIB has agreed to sell a portfolio of mainly deep-in-default loans for €400 million to a consortium led by US distressed debt group Cerberus and including debt management company Everyday Finance and London-based investment firm LCM Partners.

The original value of loans in the portfolio, dubbed Project Sycamore, was said to be more than €700 million. Sources said that the book included buy-to-let mortgages, land and development and commercial property loans, as well as unsecured personal debt and residential mortgages.

AIB said that the sale of the portfolio, where the average loan was about nine years in default, “substantially resolves” the bank’s legacy, long-term non-performing exposures (NPEs), a phrase the bank uses instead of non-performing loans.

The bank said that the deal would reduce its non-performing exposures ratio to 4.4 per cent, the lowest among the three remaining Irish banks, compared to 5.1 per cent at the end of March. It added that it remains “firmly on track” to meet its target of reducing the ratio to about 3 per cent by the end of next year. This will be aided by the bank’s planned purchase of €9.9 billion of performing tracker mortgages and corporate and commercial loans from Ulster Bank, as the latter exits the market.


“Agreement of this transaction is an important milestone for AIB as it reduces the NPE ratio to well below 5 per cent,” said chief executive Colin Hunt. “It demonstrates further progress as we move towards closing out legacy items this year while maintaining momentum in the delivery of our strategy.”

The make-up of the consortium is different from one outlined by sources earlier this month. They had said that Cerberus had joined forces with rival CarVal and debt collection firm Cabot to bid for the portfolio.

The loans in Project Sycamore incurred a pretax loss of €46 million last year, including the impact of loan loss provisions taken during the period as the bank prepared the portfolio for sale.

Following the sale, all customers in the loan portfolio will continue to have the same regulatory protections, including protections under the Consumer Protection Code and the Code of Conduct on Mortgage Arrears, AIB said. The loans will be sold with the benefit of existing protections under the customers’ loan contracts. Everyday Finance, as a regulated loan services company, will be responsible for the day-to-day handling of the loans.

AIB will have reduced its non-performing loans from a crisis-era peak of about €31 billion in 2013 to €2.6 billion as a result of the latest loan sale. While most of the reduction has been a result of the bank restructuring loans of customers willing to work with it, the bank has resorted to portfolio sales in recent years to accelerate the resolution of more problem loans.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times