Cerberus said to lead race for AIB bad-loans portfolio

A preferred bidder may be selected as early as next week for the so-called Project Redwood portfolio

Cerberus, the US distressed debt firm, is understood to be leading the race to buy a portfolio of distressed loans from AIB, even as the size of the book has been scaled back dramatically since it came to market last year.

Sources said on Friday that the so-called Project Redwood, which initially contained about €3.8 billion of non-performing loans (NPLs) when AIB and its advisers first began to assess potential interest in the portfolio, is set to be sold with a little more than €1 billion of debt.

A preferred bidder may be selected as early as next week after the three short-listed bidders - Cerberus, private equity firm Lone Star and Wall Street giant Goldman Sachs - each tabled final offers at the end of April. The portfolio includes loans against commercial property, buy-to-let mortgages and land.

The size of the portfolio has shrunk significantly from the time when the sale was first mooted. A number of loans that were originally in the portfolio have since been restructured, while AIB has also seen other borrowers starting to re-engage to find a workable solution.


Sources said that any private dwelling home loans associated with distressed commercial borrowers had been removed from Project Redwood before it was officially put on the market, allowing the bank to rule out the sale of home loans when it reported annual figures at the start of March.

Spokesmen from AIB and Cerberus declined to comment.

Cerberus has been one of the most active buyers of Irish loans in the wake of the financial crisis, most recently striking a deal late last year to acquire about €300 million of troubled loans from AIB, mainly secured , mainly secured against commercial property in Northern Ireland and elsewhere in the UK.

The firm acquired Nama’s £4.5 billion (€5.1 billion) Northern Ireland portfolio, known as Project Eagle, in 2014 at a deep discount to par. The deal is currently the focus of several investigations in the Republic, the North and US following claims that business figures and politicians were to benefit from the transaction.

Cerberus subsequently acquired another portfolio in 2015 from Nama, called Project Arrow, which had a face value of €6.25 billion, as well as loans from Ulster Bank and Permanent TSB.

The Irish Times reported earlier this month that Cerberus bid for Project Redwood through a Central Bank-regulated subprime lender, Stepstone Mortgage Fund, which it acquired earlier this year. That firm was had been set up as a joint venture by KBC and US investment bank Lehman Brothers in 2006, but stopped writing new business in the wake of the crash.

The AIB loans are among a number of books currently on the market as lenders seek to lower their NPL levels. Ulster Bank put €1.6 billion of impaired mortgages on the market this week, while Permanent TSB is currently marketing up to €3.7 billion of loans. Elsewhere, Lloyds Banking Group is seeking to sell its remaining €5 billion of mainly performing Irish home loans.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times