AIB’s offloading of Project Cypress distressed loans is timely

Cantillon: Sale helps tidy up bank’s stock of non-performing mortgages ahead of IPO

Michael Noonan has said he will only sell shares in the bank if he can secure a good price for taxpayers, who are still owed more than €17bn in bailout capital. Photograph: Crispin Rodwell/Bloomberg

Michael Noonan has said he will only sell shares in the bank if he can secure a good price for taxpayers, who are still owed more than €17bn in bailout capital. Photograph: Crispin Rodwell/Bloomberg

 

AIB’s sale on Thursday of its Project Cypress portfolio of distressed property loans was timely on a couple of fronts.

Firstly, it resolved a book of buy-to-let loans that was deep in arrears – most were more than two years behind with their mortgage payments. A near 50 per cent haircut is believed to have been applied to the sale of loans that had a face value of €400 million.

As noted in February by Minister for Finance Michael Noonan, in answer to a parliamentary question, some of the investors who owned the properties either weren’t co-operating with the bank and/or weren’t remitting the rent to service their loans.

This problem has now been transferred to Goldman Sachs, who might take a different approach to resolving the loans.

Perhaps more importantly, the sale helps to tidy up AIB’s stock of non-performing loans in advance of a stock market IPO of its shares by the Government, possibly as early as May or June.

Both the Department of Finance and AIB are eager to make the IPO happen this year, and barring a last-minute hiccup in the markets or the sudden collapse of the Fine Gael-led Government, it looks certain to get the green light.

French election

Two boxes remain to be ticked. One is the result of the French presidential election. Far right candidate Marine Le Pen is expected to be in the final run-off on May 7th and a victory for her would spook the markets and put a large question mark against the future of the European Union.

The second one is around price. The Minister has consistently stated that he will only sell shares in the bank if he can secure a good price for taxpayers, who are still owed more than €17 billion in bailout capital.

He won’t want to give political opponents any ammunition by pitching it too low nor will he want a repeat of the Permanent TSB experience, where the shares sold in its IPO process in 2015 are trading at a 48 per cent discount to the float price.

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