BIDDERS VYING for Anglo Irish Bank’s $10.1 billion (€7 billion) US loan book may seek the inclusion of a clause to change the terms of the deal in light of the volatility in the global financial markets.
First bids for the loan book must be submitted by tomorrow before bidders will be asked to prepare “best and final” bids by on or around August 22nd ahead of the the chosen bidder or bidders being decided by the end of the month.
The Minister for Finance Michael Noonan, as shareholder of Anglo, and the board of the State-owned bank will have to sign off on the sale of the loan portfolio.
A sale is not expected to be completed until later in the autumn, although further market turmoil could delay it.
Sources close to the sale process said prospective buyers may seek to include a “material adverse change clause” into a sale agreement to protect them against further turmoil in the global markets.
The portfolio is most likely to be broken up and sold off in tranches.
Selling the portfolio to a single buyer may fast-track the disposal of the loan book – one of the biggest portfolios to come on the US property market in recent years.
However, the Government will be keen to secure the best price for the book which has attracted strong interest and this would involve a sell-off in parts.
The market turmoil stemming from the European debt crisis and the loss of the top AAA credit rating by the US may affect the prices agreed for the loans.
Banks such as Bank of America and Citigroup were reported to be eager to finance bids by private equity firms seeking part or all of the book. The firms include Blackstone, Starwood, BlackRock and Centerbridge Capital Partners.
Other banks including Deutsche Bank, Goldman Sachs and Wells Fargo were also reported to be interested in providing finance.
The fact that Anglo retained the US loans on its books and did not syndicate the loans to other lenders, which is more common among US banks, has generated strong interest in the portfolio.
The structuring of the loans as special purpose vehicles makes them more attractive because, as Anglo is the sole lender, purchasers can take control of the underlying property more easily.
Bids will be accepted by the US broker Eastdil Secured, which was appointed to oversee the sale.
The portfolio comprises 251 loans of about $9.8 billion and a loan of $345 million on the Mandarin Oriental Hotel in Boston, which is directly owned by Anglo.
Some 91 loans of $4.3 billion – or 42 per cent of the book – are performing, while 158 loans totalling $5.5 billion – 54 per cent of the book – are sub- or non-performing.
Anglo has divided the portfolio up into eight pools and buyers may submit offers to bid for the book in its entirely or for individual pools.
The portfolio of loans is backed by what are regarded in the market as trophy assets in New York, Boston and Washington.
The properties include a shopping centre on Rodeo Drive in Beverly Hills, the Apthorp apartment building in New York and the Palmer House Hilton in Chicago.
The disposal marks the sale of largest asset portfolio by an Irish bank since AIB offloaded Poland’s Bank Zachodni WBK last year.
Anglo is the first overseas bank to sell an entire US loan portfolio.
The sale is being closely watched because if it is successful it may prompt other foreign banks to sell US assets, though the market turmoil adds uncertainty.
Second-round bids are being accepted this week for $1.4 billion of US loans being sold by Bank of Ireland. AIB agreed to sell about $1 billion of US commercial property loans in May.
The disposals are part of the deleveraging agreed under the EU-IMF bailout to wean lenders off Irish and ECB funding, and return them to self-sufficiency.
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