Lloyds’ Poseidon adventure seeks discount buyers

Lloyds Banking Group is planning to sell €4.2 billion of face value legacy loans connected with Ireland in what will be one of the biggest such real estate portfolio sales here since the financial crash in late 2008.

Dubbed Project Poseidon, the disposal covers the vast bulk of what remains from Bank of Scotland’s former operations in Ireland. It has been brought to market by Deloitte with first bids due to be lodged in early June.

The loans would be expected to sell at a large discount despite the recovery in Irish asset prices in the past 18 months and strong interest from international investors for projects here.

A number of high-profile hotel and leisure assets are connected with the portfolio, including the Lyrath Estate Hotel in Kilkenny and the Regency Hotel in Drumcondra in Dublin.

It it understood that the portfolio comprises about 3,500 customers and 5,000 loans. Some 80 per cent of it is connected with the Republic, about 18 per cent in Northern Ireland and the balance in the UK and Prague.

Consortium approach

It is a mix of performing and non-performing loans and is expected to generate a lot of interest among investors. One source suggested it could involve a consortium approach, with one or two main parties and certain assets sold on to specialist sectoral investors.

It comprises loans connected with residential, offices, retail, industrial and tourism and leisure. Residential amounts to about 25 per cent of the portfolio and offices 12 per cent.

A consequence of this latest sale by Lloyds is that it will hasten the wind-down of Certus, an Irish specialist loan-servicing group that was an offshoot of Bank of Scotland (Ireland) when it was set up in January 2011.

Staff are currently exiting the business each month via voluntary redundancies and it expects to have fewer than 400 employees by the end of June this year.

When contacted, a spokesman for Lloyds declined to comment yesterday on its latest portfolio sale.

However, Lloyds has shrunk its loan portfolio in Ireland substantially over the past few years following the closure of both Bank of Scotland (Ireland) and Halifax.

At the end of 2010 the face value of its loan book here was £27.4 billion. Its latest annual report states that it reduced its gross loans and advances in Ireland by £7.5 billion in 2014, via strategic transactions, disposals, write-offs and net repayments.

Impaired

It disposed of two significant impaired portfolios last year, with a combined gross book value of £2.4 billion. The Irish commercial portfolio remained “significantly impaired” at 89 per cent, with provision coverage of 81 per cent.

In December, Lloyds agreed the sale of a €2 billion portfolio of Irish buy-to-let residential and small commercial mortgages to Goldman Sachs and private equity group CarVal. The portfolio comprised about 2,000 accounts.

On May 1st, George Culmer, the UK bank's chief financial officer, put the current figure at about £4.7 billion.

“We have made good progress on Ireland,” he said.

Lloyds isn't the only financial group looking to sell a large portfolio of assets in Ireland at present. Ulster Bank, the Royal Bank of Scotland subsidiary, is reported to be preparing to sell a €2.5 billion portfolio of SME, buy-to-let and commercial property loans.

Separately, the National Asset Management Agency is preparing an €8.4 billion portfolio of about 500 smaller debtor loans, under the code-name Project Arrow.